Aug 4, 1988
CONTINUED GROWTH IN WORLD TRADE.GENEVA, AUGUST 2 (IFDA/CHAKRAVARTHI RAGHAVAN) -- World merchandise trade expanded by an estimated five percent in volume in 1987, and is currently increasing at about the same rate, the Secretariat of GATT has reported. The GATT estimation is in an advance copy of the first two sections of its annual survey, "International Trade 1987/88", expected to be published later in the year. The most striking feature of the world economy over the last 12 months, according to GATT, has been its "unexpected resiliency". And one of the most encouraging factors in the current situation is the outlook for world merchandise trade, which appears likely to register a real growth of about five percent in volume for the second consecutive year in 1988. A year ago, there had been fears that the world economy might plunge into a vicious circle of dollar depreciation, inflation and recession. The October stock market crash resulted in scaling down of forecasts. But most current projections anticipate growth of output this year and the next will be close to the three percent in 1987. This did not mean that the stock market crash has not had an effect, and adverse impacts on investments and consumer spending could still emerge later this year, GATT cautions in a footnote. In value terms, world merchandise exports increased by an estimated 16-1/2 percent to a record 2,475 billion dollars. This whopping increase in value, according to GATT, is due to: the five percent volume increase, increases in world market prices for petroleum and several non-petroleum commodities, the valuation effect of appreciation of several major currencies against the dollar, and the impact on dollar prices of underlying national inflation rates. In another footnote, GATT has entered a caveat on the data. Merchandise trade figures are mostly in value terms and expressed in U.S. dollars, and volume figures are arrived at from the value figures by adjusting them for estimated changes in dollar unit values. This, GATT notes, is necessarily an imprecise process, particularly when there are large differentials among countries in inflation figures or when there are large changes in exchange rates or relative prices of major products. In 1987, manufactured exports resumed its traditional role as the most dynamic category, with an estimated 5-1/2 percent gain. In volume terms, agriculture trade increased in line with total merchandise trade, recovering substantially from the marginal declines in 1986. However, it continues to be affected by subsidies, market restrictions and market sharing arrangements, so much so that the pickup in many agricultural prices since beginning of 1987 has done nothing to reduce the need for major reform in trade-related agricultural policies, the GATT economists argue. The share of world trade in tropical products, they note, has been declining gradually between 1967 and 1986, except for 1977 when prices for tropical beverages increased dramatically following the decline in output due to bad weather. In contrast to an estimated 4-1/2 percent growth in volume of world agricultural trade, output is estimated to have declined by three percent. The trade in mining products, which after long stagnation and decline became the fastest growing category in volume terms in 1986, increased only one percent in 1987. The volume of trade in mining products over the last two years has been heavily influenced by the prices of petroleum. This last accounts for 60 percent of world trade in mining products, and other fuels, whose prices are linked to those of petroleum, for another 18 percent. The world trade in manufactures was largely influenced by the performance of industrial countries, which account for 70 percent of world imports. But there was also a rapid growth in imports of manufactures by four Asian economies – Hong Kong, South Korea, Singapore and Taiwan. Together these four accounted for nine percent of world exports and six percent of world imports of manufactures in 1987. A footnote to another table in the GATT report however suggests that in the case of Hong Kong and Singapore, trade date include substantial re-exports and imports for re-exports. Since GATT data are on country-basis, the figures do not show how much of this trade is really of trade between principals and subsidiaries of a TNC, and what is the real net welfare or value added to the host third world country in such trade. For the third world as a whole, volume of exports slowed down in 1987, from a nine percent growth in 1986 to a six percent in 1987. Imports changed from a decline of five percent in 1986 to a three percent growth in 1987. Since 1980 historic peak, the share of third world countries in world merchandise exports has been on a declining trend, due entirely, according to GATT, to declining earnings from trade in fuels. However, the dollar value of non-fuel merchandise exports has been more rapidly than total world merchandise trade, GATT adds. Trade among third world countries accounted for 4.9 percent of a world merchandise trade last year. From 1981 to 1986, the dollar value of this mutual trade had been declining from year to year, and in 1986 was more than a quarter lower than that of the 1981 peak. In 1987, the third world countries sold more than two-thirds of all their merchandise exports to the industrialised countries, and another quarter of their dollar earnings came from trade among themselves. The remaining 6.5 percent of their earnings came from sales to eastern trading area. Third world countries continue to remain an important customer for the industrialised countries, even though the dollar value of exports of industrial countries to the third world changed very little between 1980 and 1987 – from 294 billion to 303 billion. While at its peak in 1981, the trade with the third world accounted for 21 percent of the total exports of the industrial countries in 1987 it was 17.5 percent. The merchandise exports of the 15 heavily indebted countries (Argentina, Bolivia, Brazil, Chile, Colombia, Cote D’Ivoire, Ecuador, Mexico, Morocco, Nigeria, Peru Philippines, Uruguay, Venezuela and Yugoslavia), which had dropped to 100 billion dollars in 1986 rose by about ten percent in 1987. Their combined imports, which had been stable between 1984-86, increased by about seven percent. Though much below the world merchandise performance of 16-1/2 percent in value, it was still better than their figures in 1986 when imports declined by one percent and exports by 15 percent. The ratio of external debt to exports of goods and services of these 15 declined from 344 percent in 1986 to 329 percent in 1987, while ratio of interest payments to exports dropped from 28 percent to 22 percent. The last decline was in part due to unilateral suspensions of interest payments, GATT notes. But the ratio of external debt to GDP of the 15 increased from 46.5 to 48.5, reflecting a further rise in their external indebtedness, and the fact that despite expanding exports in the group as a whole, in several of them there has been a slowdown in economic growths last year. In Sub-Sahara Africa (excluding Nigeria), the ratio of total external debt to exports further increased last year to touch 325 percent. But a modes increase in value of goods and services exported, as well large-scale rescheduling of payments, brought their ratio of interest payments down from 12.5 percent in 1986 to 10.5 percent in 1987.