Sep 26, 1987
GATT EXPECTS NO MAJOR CHANGE NEXT YEAR IN OUTPUT OR TRADE.GENEVA, SEPTEMBER 24 (IFDA) – The world merchandise trade grew by a 3-1/2 percent in volume in 1986, and in 1987 is likely to be close to the same rate of growth, according to GATT forecasts. Current forecasts for 1987, the GATT secretariat notes, predict rate of growth of GDP at 2.5 percent in industrial world, and 3.5 percent in the third world, and just under three percent for the world economy as a whole. This is about the same performance in 1986, and "at the present time, no major pickup in economic growth is anticipated in 1988". As for trade, the GATT secretariat expects "no major change in the growth rate of trade currently foreseen for 1988". The GATT estimate of 3.5 percent growth in merchandise trade volume in 1986 is much smaller than the 4.9 percent estimate of the international monetary fund. The world merchandise production expanded in 1986 at about same three percent rates as in 1985. In the past two years, the margin of trade growth over output growth has narrowed to half a percentage point. In the 1960’s the margin was 2-1/2 percentage points, and in 1970’s one percentage point. Due to the sharp fall in oil prices, petroleum trade grew by eight percent in volume in 1986. Other mining products increased by three percent. But volume of world trade in agriculture declined by one percent, though preliminary estimates show output itself increased by one percent. Manufactured trade (accounting in value terms for two-thirds of world trade), grew three percent in volume, a considerable slowdown from the previous year’s five percent or the 4-1/2 percent average annual gain thus far in the 1980’s. GATT suggests that a number of factors have been responsible for slowdown in manufactured trade growth. There has been an asymmetric response to large movements of real effective exchange rates since 1985. While production and exports dampened considerably in countries with appreciating currencies, it showed little or no improvement in countries with depreciating currencies. Import volumes fell by roughly one-fifth in OPEC members, who in 1985 accounted for six percent of world manufactured imports. At the same time, the imports into other third world countries (who currently account for 15 percent of world manufactured imports) declined by an estimated two percent. The growth in volume of imports increased both in West Germany and Japan, and especially in Japan. Export growth slowed in West Germany and turned negative in Japan. In the U.S., dollar depreciation has stimulated modestly export volumes, but import volumes have also accelerated rather than declined. U.S. volume imports declined from the 1986 level, and export volumes picked up strongly. Despite this, there was a marginal increase in U.S. merchandise trade deficit, mainly due to the fact that value of exports was 40 percent smaller than value of imports. The favourable volume changes were too small to prevent a further increase in dollar value of the deficit. In value terms, world merchandise trades increase by ten percent to 2.120 billion dollars. The industrialised countries as a group recorded a strong increase in merchandise trade, while the eastern trading area (which in GATT means eastern Europe, USSR, china and other centrally planned economies of Asia) reported gains in line with increase in world trade. But the dollar value of total merchandise exports of the third world fell by about six percent, while their imports increase moderately. If fuels (accounting for one-third of total exports) are excluded, third world exports were up by 15 percent and imports by more than seven percent. The third world’s dollar earnings from exports of non-fuel primary commodities (accounting for a quarter of total export earnings) increased by eight percent, but it was still five percent below the 1980 level. The third world’s value of manufactured exports rose by 17 percent, well below the 20 percent increase for the world as a whole. But third world’s share of manufactured exports in total exports rose to 40 percent, as against 19 in 1980. But this increase is explained partly by the absolute decline in earnings from fuels, and partly by a rapid growth in the dollar value of manufactured exports. A small number of exporters account for most of the manufactured exports, though a growing number of countries are now becoming significant exporters of manufactures. In the 15 heavily indebted countries, imports rose a modest two percent, the first increase since 1981, but accompanied by a 15 percent decline in combined export earnings. Their total merchandise trade surplus declined from 34 billion dollars in 1985 to 15 billion in 1986. The GATT economists have also presented data about dollar value of imports and exports trade between third world and industrialised countries for 16 product groups, to argue that in several product groups the two-way trade was becoming "more balanced" (with third world exports increasing more than imports). It also makes the point that clothing trade was becoming "less balanced". The GATT secretariat’s efforts to project "balance" in trade in product groups would no doubt strengthen the drive in some of the leading industrialised economies to achieve "balanced trade", bilaterally and in product groups, with other countries. But this runs against the theology of GATT, which as GATT economists have in previous reports contended is a multilateral trading system, and efforts to have bilateral balancing are meaningless. The report gives no explanation. But some third world diplomats suggested that this may be part of the GATT secretariat effort to project the concerns of industrialised countries who want third world countries to increase their imports of textiles and clothing from the industrial world, in return for the industrial world’s giving up its MFA privileges (of restricting imports from third world, contrary to GATT principles).