No. 7 — February 18, 2000


Weekly Review

--- by Marc Castellano

Prime Minister Keizo Obuchi used a speech to the February 12 opening session of the quadrennial meeting of the United Nations Conference on Trade and Development in Bangkok to raise a number of developing-nation concerns, address the effects of globalization and call for the early launch of a new round of multilateral trade negotiations. He had decided at the last minute to attend the meeting, apparently sensing an opportunity to build support among developing countries for the July 21-23 summit of the leaders of the Group of Seven industrialized nations plus Russia on Okinawa.

In his speech to high-level representatives of UNCTAD's 188 members, Mr. Obuchi highlighted the need to encourage developing countries to participate fully in the world economy so that they can benefit to the greatest possible extent from the inevitable process of globalization. He also indicated that Japan is prepared to provide financial and technical assistance to foster the emergence of a "sophisticated information and communication society" in poor countries. On the trade front, Mr. Obuchi promised that Japan would back an initiative to extend duty-free and quota-free treatment to imports from the world's least developed economies — provided that other major nations do likewise.

In a significant break from past reticence on another issue of importance to developing countries, Mr. Obuchi described the "pressing need" to provide debt relief to the international community's poorest members. The leaders of the G-7 nations agreed on a framework for multilateral debt relief at their June 1999 summit in Cologne (see JEI Report No. 24B, June 25, 1999). While other capitals pledged significant contributions to implement the Cologne Debt Initiative — estimated to cost $27.5 billion in terms of net present value — at a meeting last September chaired by the World Bank and the International Monetary Fund, Tokyo was unwilling to put forward a specific amount (see JEI Report No. 37B, October 1, 1999).

The dithering on the part of Japanese policymakers may have been due to the fact that Tokyo has the most at stake. As of March 31, 1999, Japan had some ¥930 billion ($8.5 billion at ¥110=$1.00) in outstanding bilateral official development assistance loans to the 41 economies covered by the Cologne Debt Initiative. That amount represented more than 40 percent of the total credit extended by the G-7 countries — Canada, France, Germany, Great Britain, Italy, Japan and the United States.

Now, however, Mr. Obuchi is calling early implementation of the initiative "urgent." He promised that Japan, as chair of the upcoming G-8 summit, would work with its counterparts to advance last year's debt-relief proposal. He also pointed out in his UNCTAD address that Tokyo not only has reduced its bilateral loan claims but also has made sizable contributions to the debt-relief trust funds established by such international development organizations as the World Bank. Despite the upbeat words, Mr. Obuchi cautioned that any debt relief forthcoming would not be a panacea for poverty. Indeed, Tokyo will continue to provide aid in a variety of forms to support countries covered by various loan-forgiveness programs.

Turning to another touchy subject, Mr. Obuchi called for an early start of new global trade talks. An attempt to launch a round of negotiations under the auspices of the World Trade Organization collapsed last December amid widespread intransigence and public protests (see JEI Report No. 46B, December 10, 1999). Since then, many nongovernmental organizations and activist groups have continued to wage a vocal campaign against what they see as the ill effects of liberalized trade and globalization. For instance, protesters were present at the recent World Economic Forum, a gathering of business and political elites held annually in Davos, Switzerland. Not surprisingly, the UNCTAD meeting, convened to discuss globalization, attracted a few hundred demonstrators who pledged to remain for the duration of the weeklong talks.

In addition to surmounting the complaints in the Western world about the fallout from freer global trade, the international community will have to address the worries of developing nations about continued trade liberalization as well as the issue of waning institutional confidence in the WTO before a new round of negotiations can begin. Japan already has signaled its willingness to tackle these stumbling blocks as vigorously and as soon as possible. At the opening UNCTAD session, Mr. Obuchi pledged to voice the concerns of developing nations in relevant forums. He also emphasized the need to strengthen WTO rules. Moreover, he said, Japan stands ready to provide 2,500 people over the next five years to help Third World economies implement current and future WTO market-opening agreements.

Mr. Obuchi's statements in Bangkok gave a sense of how far Japan is prepared to go to prevent the divisive issue of another MTN round from overshadowing the G-8 summit. His speech also reflected Tokyo's belief that restoring developing countries' confidence in trade liberalization and globalization is key to boosting momentum for a new set of negotiations.

The views expressed in this report are those of the author
and do not necessarily represent those of the Japan Economic Institute

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