3-MONTH OLD WTO RESPONSIBLE FOR TRADE GAINS IN 1994!

6:55 AM Apr 4, 1995

3-MONTH OLD WTO RESPONSIBLE FOR TRADE GAINS IN 1994!
Geneva 3 Apr (Chakravarthi Raghavan) -- World merchandise exports grew nine percent in volume, the largest yearly gain since 1986, according to trade figures released by the World Trade Organization (WTO), in a preliminary estimate for 1994.

But the fall in value of the dollar visavis other major currencies, translated this nine percent volume increase into a 12 percent value increase to reach $4060 trillion.

Promptly, even before the embargo set for publication of the data expired, WTO Director-General Peter Sutherland (in a speech at Ottawa) claimed that the principal factor for these best figures for nearly 20 years was the conclusion of the Uruguay Round and the decision to set up WTO.

The negotiations were officially concluded on 15 December 1993 - but in reality stretched beyond that date with many bilateral tariff negotiations continuing almost till just before the Marrakesh meeting of April 1994, when the agreements were signed.

They became effective 1 Jan. 1995, but much of tariff cuts and partial liberalisation in agriculture is atleast six years away, and curbs against textiles and clothing imports from the South in 2005.

The GATT economists said the higher growth of world merchandise trade in 1994 was due to the sharp recovery in Western Europe and the continuation and strengthening of trade expansion in Asia, North America and Latin America.

Sutherland claimed at Ottawa that the immediate impact of the successful conclusion of the negotiations in December 1993 had helped produce the best world trade figures for nearly 20 years and that while other factors also contributed to producing these dramatic results, "the renewal of confidence in the multilateral trading system that came with the decision to set up the WTO and the assurance of continuing trade liberalization it represents, are undoubtedly principal factors in revitalizing trade-led growth"

Privately WTO officials concede that while the conclusion of the Round could have had some positive psychological effects (on the 1994 trade figures) such as investment decisions, it could not be factored into the actual trade outcome.

Up the hill from the WTO's lake-side headquarters in Geneva, inside the UN's Palais des Nations complex housing the secretariat of the UN's regional Economic Commission for Europe (ECE), the ECE economists coincidentally put out a report showing that the European recovery and three percent output growth in 1994 was export- and consumption-led, that there was slack capacity in industry, but that the sustained 3-1/2 percent growth needed to reduce unemployment had to be investment-led, and for such investment to take place governments need to put in place policies to counter exchange fluctuations and reduce real long-term interest rates.

If anticipation (of the WTO's conception and birth) can produce such "best ever results", what may the fact of WTO establishment do?

According to the GATT economists, the strong expansion of trade would continue in 1995, "but at a slower pace than in 1994" -- at eight percent rather than the nine in 1994.

But they played coy and went on to say they were not sure how even this forecast, from data prepared in December last (but released now), would need to be adjusted in the light of the turmoil on the world financial markets, the repercussions of the peso crisis in Mexico (which might adversely affect prospects for trade and output growth in net-capital importing developing countries), the sharp appreciation of the Japanese yen and the German mark as well as the strains on the European Monetary system which may slow pace of recovery in Japan and Western Europe.

"Although these developments indicate an increase in the downside risks associated with the forecasts for the current year," the GATT economists said, "it would be unduly speculative (emphasis added) to be precise about the likely impact of the increase in uncertainty on the outlook for GDP growth for the remainder of 1995."

However, in November last, when the acceptance of the Marrakesh agreement by the US Congress seemed in jeopardy, these same economists had produced a report about the likely gains of the Uruguay Round. They painted scenarios of a win-win situation with a possible 9-24 percent increase in volume and $244 billion to $668 billion in world trade value in year 2004, and some 500 billion dollars in world income gains in their scenario of monopolistic competition!

Based on the preliminary nature of their 1994 data (the full data would be available only this November) the economists could give no sectoral details, but said that trade in office machines and telecommunication equipment (including computers, computer parts, semi-conducts etc) showed a strong growth to raise the share in world merchandise exports to eleven percent - overtaking shares of food, automotive parts and fuels.

It is this sector, accounting for 11 percent of world trade that they used in their 2005 scenario to project gains in world income under conditions of monopolistic competition (the IBM-Compaq competition bringing down prices, as they explained it) -- doubling the gains projected by them in 1993 November !