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No. 18 — May 5, 2000

Feature Article

FORGIVING POOR-COUNTRY DEBT: WILL JAPAN LEAD THE WAY?

Marc Castellano

Summary

In an age of unparalleled prosperity for the rich nations of the world, a new consciousness has emerged about the plight of poor countries. The most destitute are so overwhelmed with debt that the majority of their citizens are bereft of such basic human needs as clean water and lack access to even primary education. Many of these poor nations are caught in a spiral of economic deterioration. In an attempt to remedy this dismal situation, leaders of the Group of Seven industrial nations agreed to implement a landmark debt-relief program at their June 1999 summit meeting.

Motivated in part by the vociferous campaigns of nongovernmental organizations and strongly backed — at least in principle — by the world's most powerful economies, the debt-relief effort seemed destined to succeed. However, momentum quickly dissipated as a host of unexpected difficulties arose, and key questions that had not been addressed effectively by international creditors reemerged to hamstring the process.

For Japan, the owner of the largest amount of poor-country debt, the issue of burden-sharing is critical. The details of the qualification process and the question of whether or not to impose strict conditions on loan cancellations still are topics of global debate. Nevertheless, Tokyo threw its weight behind the initiative in early 2000 and since has announced a range of new supportive policies. As chair of the upcoming summit of the G-7 plus Russia to be held on Okinawa this July, the Japanese government is keen to take the lead in advancing the debt-relief program.

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Weekly Review

MORI, PUTIN REAFFIRM TREATY GOAL BUT REMAIN APART ON KEY ISSUES
--- by Barbara Wanner

Prime Minister Yoshiro Mori's April 28-30 visit to St. Petersburg, Russia, the first stop on a nine-day tour to meet leaders of the Group of Seven industrial nations plus Russia, probably reinforced rather than altered his image as a neophyte in diplomatic circles. Few experts had anticipated that Mr. Mori's meetings with Russian President Vladimir Putin would result in a breakthrough on the long-running territorial dispute over four islands northeast of Hokkaido, which, for more than 50 years, has blocked conclusion of a formal treaty ending World War II between Japan and Russia. However, the fact that the two leaders were unable to agree on a date for Mr. Putin's official visit to Japan — a critical milestone, Japanese officials contend, if the two nations are to realize their goal of signing a treaty by the end of the year — did not inspire confidence in certain Tokyo quarters that Mr. Mori could hold his own with the forceful new Russian president or that Tokyo and Moscow could meet their December 2000 target.

 

KONO TRIP UNDERSCORES JAPAN'S ASIA-FOCUSED FOREIGN POLICY
--- by Marc Castellano

The 1997-99 financial and economic crisis in East Asia, while devastating for the countries caught in its grip, provided an unparalleled opportunity for Japan to demonstrate its international leadership potential. Tokyo more than met that challenge, particularly the financial aspect, unbiased observers agree. They also concur that diplomatically and otherwise, the government's engagement with East Asian nations is deeper today than it was before problems roiled the region. The latest example of this new commitment was Foreign Minister Yohei Kono's April 28-May 2 swing through East Timor, Indonesia and Singapore.

 

RISING OIL PRICES TRIM JAPAN'S TRADE SURPLUS
--- by Douglas Ostrom

Japan's customs-clearance trade surplus fell for the fourth consecutive quarter in the January-March 2000 period, contracting 6.1 percent from the same time last year (see Table 1). The drop lead to an unusually wide range of interpretations — most of which were off base. Higher oil prices were the main factor behind the decline, as reflected by the fact that the shrinkage in the trade surplus was one-third as large as the jump in oil imports. In other words, had the value of crude purchases not risen and had other factors remained the same, the huge gap between Japan's exports and imports would have widened significantly in the first quarter.

 

NOTES

Mention Super 301 or Title VII to trade policymakers in Tokyo, Brussels or the capital of another major U.S. business partner and they will talk about Washington attempting an end run on international trade rules. However, if any government has cause for complaint this year about the White House's deployment of these tools to open foreign markets to U.S. goods and services, it is authorities in several second-tier economies. Moreover, their criticism, to the extent that it exists, is muted because the enforcement actions that the Clinton administration plans to initiate as a result of its 2000 review of other countries' trade regimes and compliance with multilateral and bilateral trade agreements will be handled by the World Trade Organization.

 

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