Mar 27, 1986


GENEVE, MARCH 27 (IFDA) – There was an absolute decline in value of imports and exports of the third world countries in 1985, according to the GATT Secretariat’s first assessments of world trade in 1985.

Most of the heavily indebted countries, GATT notes, have returned to the "worrisome path" of import-contracting adjustment in 1985.

But with a 2-1/2 percent decline in world market prices in terms of the value of the dollar, the value of world merchandise exports as a whole rose by less than one percent in 1985, to 1.910 billion dollars.

In volume terms, the world trade is estimated to have increased by three percent, about the average of the past decade, but a third or the nine- percent increase registered in 1984.

Exports of agricultural and mining products declined in volume in 1985. Only the five percent increase in volume of manufactures provided the strength to world trade.

Volume of agriculture exports declined by 2-1/2 percent, and that of mining by three percent.

This is the third time that volume of agricultural exports have declined since 1950, previous declines were in 1974 and in 1982.

According to GATT, with last year’s decline, volume of agriculture trade now stands at 50 percent above its 1970 level.

Even the five- percent growth in manufactured exports was lower than the average annual increase over the last 15 years, and well below the 12 percent registered in 1984.

The 1984 recovery, GATT notes, did not bring about rebound of markets for primary commodities.

For primary commodities other than fuel, price declines were fairly general in 1985, in all major export regions and for the majority of the commodity groups.

Also, in contrast to previous years, many prices declined both in dollar and SDR terms.

With a 11 percent decline in dollar export prices of food products, and the more recent sharp falls in dollar values of petroleum, market prices for unprocessed forms of two major products of consumer budgets – food and energy – have declined substantially in the past year or so, GATT notes.

The extent to which these reductions reach the final consumer would depend on the extent to which prices on national markets are allowed to reflect changes in world market prices.

The much smaller growth in value of world trade was due to reduced growth in imports and exports of each of the main geographic areas.

Only imports into China increased in 1985.

The decline in imports and exports of the third world countries was due to a lower level of trade among themselves, and between the third world and industrial countries.

According to GATT this was the key factor accounting for the slow-down in growth of world trade in 1985.

The sharpest turnaround came in third world exports of non-fuel products. A 13 percent increase in value in this in 1984 was followed by a slight decline in 1985.

Trade among regions showed those exports from the eastern trading area (Socialist East Europe, Soviet Union, and China) too industrial and third world countries experienced the largest swing, a seven- percent drops in 1985 over 1984.

Trade among industrial countries expanded by five percent in 1984, compared to nine in 1985.

Imports into the third world – from industrial and eastern trading area, as well as from one another – declined by six to seven percent in 1985.

Exports from the third world to industrial countries also declined by four percent.

GATT notes that in previous trade cycles, trade among industrial countries was a leading factor in the trade recovery.

When this trade reached a peak and began to slow down, the stimulus of the peak to the trade of other countries enabled them to take over as a source of continued trade growth.

It was the trade among third world countries, and trade between them and industrial world as well as the eastern trading area, that kept world trade growing, in the previous cycles.

In 1985, the trade among third world countries, and between industrial and third world countries, actually contracted by seven and five percent respectively.

The countries of south-east Asia had a particularly poor trade performance during last year.

In the last decade or so, these countries have been held up as to most dynamic segments of world economy, in both output growth and trade, and held up as examples to other third world countries.

But in 1985, the region as a whole suffered a serious setback in trade, with aggregate exports falling by two percent and imports by six percent, compared to growth rates of 17 and three percent respectively in 1984.

Apart from the commonly attributed reason of slowdown in U.S. recovery, there were other factors at work as well, according to GATT.

These included: fall in petroleum prices affecting export earnings of Indonesia; fall in prices of tin, rubber and sugar affecting Malaysia and Philippines; domestic cost pressures reducing Singapore’s competitiveness; and increased uncertainty over trade policies abroad, discouraging trade-related investments.

The 16 heavily indebted countries, GATT notes, have returned to the import-contracting adjustment that characterised their performance in 1982 and 1983.

Both their exports and imports decreased in 1985, each by about four percent, and their combined trade surplus remained at the same level as in 1984.

Exports increased only in five of the 16, and 13 of the 16 experienced an import decline.