"Citizens Network" promotes U.S.-Japan cooperation in Third-World development - Citizens Network for Foreign Affairs

Business America, April 9, 1990

'Citizens Network' Promotes U.S.-Japan Cooperation in Third-World Development The Citizens Network for Foreign Affairs, in cooperation with the Congressional Research Service of the Library of Congress, conducted a symposium on March 9 on "Japan's Capital Surplus and Its Implications for Growth in Developing Countries." The symposium was the first in a series of conferences to be held under a new Citizens Network project entitled The United States and Japan: Stimulating Growth in the World's Emerging Economies.

The U.S./Japan Project is a two-year initiative which will explore the opportunities for more effective cooperation between Japan and the United States in stimulating growth and development in the emerging economies. It will examine U.S. and Japanese aid, trade, and investment strategies as these affect key countries in Latin America and Asia. Mexico and Latin America will be the central focus in the first year, and Asia during the second year.

The March 9 conference began with a discussion of Japan's capital surplus moderated by John R. Petty, former President of Marine Midland Bank, and Chairman of the new U.S./Japan Project. The discussion was led by Dr. Masaru Yoshitomi, Director General of the Economic Research Institute of the Economic Planning Agency of Japan, who explained how a series of factors--high household savings rates, a decline in the Japanese Government deficit, and a weakened dollar after the 1985 Plaza Accord--ed to an enormous increase in Japan's capital surplus in the late 1980s. Japanese direct investment abroad has more than doubled since 1985, with the bulk of new investment going to the United States and now Europe.

The luncheon address was delivered by Charles H. Dallara, Assistant Secretary of the Treasury for International Affairs, who spoke of the contribution Japan has already made in recycling its capital surplus and the important role it has played in supporting the Brady Plan. He hoped that progress in the Structural Impediments Initiative talks and in other trade negotiations would enable economic cooperation to be strengthened.

The key points discussed during the symposium were:

* Japan's emergence as the largest single source of financing for developing countries.

* The rapid growth of Japanese direct investment in North America and Europe, with little growth in manufacturing investment in Latin America, and virtually none in Africa and the Middle East.

* Japan's second budget, the Fiscal Investment and Loan Program, provides a crucial off-budget source of financing for Japan's capital recycling programs through Japan's Export-Import Bank.

* Japanese capital investment has grown rapidly in the open, trade-oriented economies of Asia, especially in such countries as Thailand and Malaysia. The biggest unmet financing needs are for development in countries in Latin America and Africa.

In launching the U.S./Japan Project, John H. Costello, President of the Citizens Network, said: "Much of the current American interest in Japanese aid either focuses on burden-sharing or fails to take into account the role of the Japanese private sector. A less debt-burdened Latin America and a vigorously growing Asia hold out the promise for substantial growth in U.S. exports, if we fully engage the U.S. and Japanese public and private sectors in stimulating growth in these areas. Bilateral trade disputes should not be allowed to overshadow the opportunities for more effective economic cooperation strategies between Japan, the United States, Asia, and Latin America."

The U.S./Japan Project will: focus attention on specific regional relationships, examining the U.S. and Japanese roles in these areas, with emphasis on key Latin American and Asian countries; and produce new policy strategies aimed at encouraging investment and new forms of public-private sector cooperation among the United States, Japan, and developing countries.

Future project conferences will be held in San Diego in October 1990, in Tokyo in March 1991, and Mexico City in September 1991. Later conferences focusing on Asia will be held in New York, Bangkok, and Tokyo.

The Citizens Network for Foreign Affairs is a nonprofit, bipartisan organization whose purpose is to engage U.S. public and private sector leaders in an ongoing dialogue on the implications for U.S. leadership of an increasingly interdependent global economy. The objective is to build a national network of private sector leaders with a global vision and to engage these leaders in the process of shaping U.S. international economic policy.