ECONOMIC INTELLIGENCE WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80T00702A000700010004-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 52
• Document Creation Date: December 20, 2016
• Document Release Date: May 26, 2006
• Sequence Number: 4
• Publication Date: June 22, 1978
• Content Type: REPORT

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Economic Intelligence
Weekly Review
22 June 1978
State Dept. review completed
ER L;(Wl rzr-O25
22 June
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ECONOMIC INTELLIGENCE WEEKLY REVIEW
22 June 1978
Current Survey ....................................................................................................
Major Recent Developments Affecting the International Economy
EC: Time for Reappraisal and Renewal of the Lome Convention ................ 5
The European Community and the 53 African, Caribbean, and Pacific
(ACP) states next month will formally start renegotiating their comprehen-
sive economic cooperation agreement, with each side intent on pushing
the balance of benefits in its direction.
Canada: Controversy Over Automotive Trade Agreement ............................ 9
Some government officials, concerned with the $1 billion deficit in
automotive trade, feel Canada has not been getting its fair share of
employment and investment under the 13-year-old automotive pact with
the United States.
Brazil: Agricultural Policies Under Fire .............................................................. 15
Little permanent change can be expected from the current reexamination
of farm credit programs and price support policies that have favored
export-oriented agricultural production over production of domestic food
crops.
Notes ....................................................................................................................
Cuba Harvests Bumper Sugar Crop
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MAJOR RECENT DEVELOPMENTS AFFECTING
THE INTERNATIONAL ECONOMY
With a strong January-March economic showing, the Japanese appear increasing-
ly confident that they can achieve at least 6-percent real GNP growth in Japanese
fiscal year 1978, which began on 1 April. The official Japanese target is 7 percent; CIA
believes that a rate on the order of 5.5 percent is likely, even if further expansionary
steps are approved. A new supplementary budget, likely in the fall, would pick up
only some of the economic slack resulting from an expected drop in foreign and
domestic demand below the levels of the first quarter of calendar year 1978.
Prominent Japanese economists are questioning the government's reliance on
public works spending-as opposed to tax cuts-to stimulate growth. Their doubts
center on an inability to implement spending plans at both the national and local
levels. Japanese public works expenditures ran almost 10 percent below the planned
level in FY 1977. Tokyo will consider the question of public spending versus tax cuts as
part of the debate on the nature and timing of a supplementary budget.
Japan's impressive showing in its battle against inflation was buttressed by the
spring wage settlements. Increases ranged from 4.0 to 7.5 percent and were sufficient
to cover the 1977 increase in consumer prices only in the most prosperous industries,
such as automobiles and electrical machinery.
Bonn continues to emphasize that economic data do not permit firm judgments
on the need for stimulative economic measures. Cabinet adoption of a new 1979 draft
Note: Comments and queries regarding the Economic Intelligence Weekly Review
are welcome, F_ I
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budget has been postponed, probably because of both pronounced internal differences
on the question of stimulation and a decision to await the results of the July Economic
Summit. Officials hesitate to lower revenue estimates in line with current growth
expectations, which are more realistic than Bonn's 3.5-percent GNP growth target for
1978; this is an added roadblock to budget planning. Press reports originating in Bonn,
however, point. to Chancellor Schmidt's willingness to accept a package deal at the
Summit that would have Bonn agree to stimulation in return for (a) US assurance that
Washington would curb oil imports and (b) a general Summit renunciation of
protectionism.
The new French program to reduce government intervention in the economy will
worsen inflation and unemployment in the near term. Decontrol of prices is likely to
add 2 percentage points to the increase in consumer prices in 1978, bringing the
inflation rate to perhaps 11 percent (December to December). Reduced aid for private
firms in financial difficulty, coupled with real GNP growth of only 3.0 to 3.5 percent,
could increase the number of unemployed by 200,000 in 1978-to 1.2 million at
yearend. The benefits of these and other moves designed to improve efficiency and
encourage private investment will take longer to become apparent.
The EC Commission and the OECD have presented different economic prescrip-
tions for the West European nations. Both organizations agree that West Germany and
Belgium should be doing more to stimulate their economies. The OECD also calls for
more expansion in France, Italy, and the United Kingdom. In the Commission view,
however, France has room for further expansion only if other EC states act
energetically; the United Kingdom is seen as having even less latitude than France,
and Italy none at all. CIA generally finds the Commission's views closer to the mark.
Further stimulation by the French, British, and Italians would exacerbate existing
inflation problems and threaten recent hard-won improvements in trade balances.
Commission calculations show that increased public spending on the order of 0.8
percent of Community GNP could produce additional EC growth of 1.7 percent-
assuming similar action by Japan and other West European countries-and permit the
Community to achieve 4.5-percent growth in the year ending July 1979. The more
cautious OECD goal simply 'calls for boosting aggregate OECD growth above its
current 3.5-percent annual rate.
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CIA does not expect the increase in world grain production in 1978/79 to keep
pace with consumption. Exporter stocks, however, will be adequate to meet demand
and will remain well above the level of the early 1970s, The decline in Free World
stocks will occur almost entirely in the large US holdings. A 15-percent cut in US
wheat production in 1978/79 should be more than offset by increases in Europe,
Australia, and the developing countries.
The United States will absorb almost one-half of an estimated fall in wheat
import demand of 6 million tons in marketing year (MY) 1979 (begins on 1 July)
compared with MY 1978, but US corn exports should increase slightly. Marketing
uncertainties other than weather include the grain import plans of the USSR and
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China and the reaction of US farmers to government programs to reduce grain acreage
and put grain in reserve programs. The USSR will probably have a near-record winter
grain crop, and early signs point to a good spring harvest as well. Still, the Soviets
probably will continue to purchase considerable quantities of grain from the United
States and other sellers in the next 12 to 15 months to meet livestock feed
requirements. World grain prices through the summer should remain well above last
summer's depressed levels.
The suspension of cobalt production in Zaire has worsened an already serious
shortage of the metal in the non-Communist world; Zairian cobalt output had fallen
sharply, even before the rebel invasion, because of mismanagement. Although damage
to the cobalt and copper facilities at Kolwezi is minimal, a return to normal operations
will depend on the return of foreign technicians, which, in turn, will depend on
improved security. The United States, with nearly two years' supply of cobalt in
strategic stockpiles, is better prepared than most Western countries to meet essential
defense needs, but US private stockpiles are extremely low. An all-out effort by other
producers of cobalt is unlikely because of the tie to production of copper and nickel,
both of which now face depressed world prices. Cobalt prices have quadrupled since
February, with strong buying pressures both in the United States and Europe. Soviet
purchases before the fighting are consistent with the USSR's requirements.
Loss of Kolwezi copper should have little impact on the world copper market.
The present overhang-in excess of 2 million tons of refined copper-is more than
enough to offset a total cessation in Zairian output for several years. Copper prices
may rise on the sensitive London market but probably not by more than 20 percent
above the recent depressed levels. The overhang aside, excess world production
capacity would be more than enough to offset the loss of Kolwezi output. The United
States, for example, presently is operating at only about 75 percent of capacity; idle
capacity roughly matches total Zairian output.
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Articles
EC: TIME FOR REAPPRAISAL AND RENEWAL OF THE LOME CONVENTION
The European Community and the 53 African, Caribbean, and Pacific (ACP)
states* next month will formally start the long process of renegotiating their
comprehensive economic cooperation agreement. Both sides are generally satisfied
with the operation of the Lome Convention, which expires in March 1980, although
each intends to propose changes and additions. The EC Commission wants to tighten
its control over the benefits provided to the ACP States; the latter are seeking still
greater benefits. The Europeans would like to alleviate ACP competition in depressed
industries, such as textiles. Although past negotiations have been cordial, acrimony
could surface if, as seems likely, the EC pushes to incorporate provisions on human
rights into the new agreement.
Lome I in Operation
The five-year agreement signed in Lome, Togo, in February 1975 grew out of
previous EC preferential trade and aid arrangements with former colonies. Under the
agreement all industrial products and an estimated 84 percent of agricultural exports
of the 53 countries enter the EC duty free. The EC reduced duties on most of the
remaining agricultural exports but could not violate its Common Agricultural Policy
by allowing free entry to products that compete directly with those produced in the
Community. In 1976 the ACP countries sold 40 percent of their exports to the EC,
although they accounted for only 3.4 percent of EC imports.
*The 53 ACP states are:
The Bahamas
Ethiopia
Madagascar
Somalia
Barbados
Fiji
Malawi
Sudan
Benin
Gabon
Mali
Surinam
Botswana
The Gambia
Mauritania
Swaziland
Burundi
Ghana
Mauritius
Tanzania
Cameroon
Grenada
Niger
Togo
Cape Verde
Guinea
Nigeria
Tonga
Central Africa
Guinea-Bissau
Papua New Guinea
Trinidad and
Empire
Guyana
Rwanda
Tobago
Chad
Ivory Coast
Sao Tome and
Uganda
Comoros
Jamaica
Principe
Upper Volta
Congo
Kenya
Senegal
Western Samoa
Djibouti
Lesotho
Seychelles
Zaire
Equatorial Guinea
Liberia
Sierra Leone
Zambia
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Separate trade protocols covering sugar, rum, and bananas have been among the
most contentious provisions of the Lome Convention. The sugar protocol, for example,
provides that the EC-itself a surplus producer-will import about 1.3 million tons of
sugar each year at a price within the range guaranteed to EC producers. Each year the
EC Commission and representatives of ACP sugar producers haggle over price and
quota allocations; the ACP nations charge that the EC dictates rather than negotiates.
For the coming market year, the EC offer is more than double the current world
market price, but ACP representatives claim that after subtracting stocking and
transport costs it would be less than the price guaranteed EC producers.
Development aid under the Convention has been slow in, starting because project
proposals submitted by the ACP states frequently have been overly ambitious or ill
prepared. Through the European Development Fund (EI)F), the EC has promised
$3.2 billion in grants and low-interest loans for 1976-79. In the first year about $550
million was obligated, of which about two-thirds consisted of grants for industrial And
agricultural development projects in the least developed of the ACP countries.
Commission officials believe most Convention funds will be committed by 1980 but
expect disbursements to lag far behind.
In early 1977 the EC finally established the EC-ACP Center for industrial
Development that was called for by the Convention to stimulate private investment in
the. ACP countries. Center officials, encouraged by the response of European investors,
last year evaluated 54 projects worth up to $1 billion in new investment for the ACP
countries.
The Lome Convention includes a unique provision for stabilizing the export
earnings of the ACP states-STABEX. The EC allocated $450 million to finance
STABEX over the five-year duration of the agreement and paid out a total of $121
million in grants and loans for 1975-76. These transfers were intended to offset the
drop in earnings from exports to the Community for 18 agricultural commodities and
iron ore.
STABEX has worked smoothly and with little controversy. According to EC
Commission officials, only a few ACP countries have tried to juggle trade data to
create artificial shortfalls. To trigger a payment, a product must normally account for
at least 7.5 percent of exports, and there must have been at least a 7.5-percent decline
in export earnings below a minimum reference level. For the least developed of the 53
countries, the trigger percentage is 2.5 percent. Two-thirds of the payments for 1975
covered recession-induced losses in, the value of exports to the EC, while the
remainder compensated for export losses stemming from natural disaster or local
mismanagement. In 1976 these shares were reversed. Payments for trade losses in 1977
have not yet been announced.
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EC: STABEX Payments'
1975 1976
Total ...................................................................................................... 80.0 40.7
Grants .................................................................................................. 45.1 31.0
Benin (peanuts, coffee, cotton, oil cake, palm oil) ........................ 7.8 3.9
Burundi (cotton, hides and skins) ...................................................... 1.6 0
Central African Empire (coffee, timber) ........................................ 0.4 0.6
Ethiopia (coffee, hides and skins) .................................................... 15.9 0
Guinea-Bissau (peanuts, palm nuts) ................................................ 0 5.6
Mali (cotton) ...................................................................................... 0.7 0
Niger (peanuts, peanut oil and oil cake, hides and skins) ............. 6.6 7.6
Somalia (bananas, hides and skins) .................................................. 2.1 0
Sudan (hides and skins) .................................................................... 1.8 0
Tanzania (cotton, sisal) ...................................................................... 2.1 5.7
Togo (coffee) ...................................................................................... 3.0 0
Tonga (copra, bananas) ...................................................................... 0 1.1
Uganda (cotton, tea) .......................................................................... 1.9 4.0
Upper Volta (peanuts, cotton) .......................................................... 0.9 0
Western Samoa (cocoa, copra, timber) ............................................ 0.3 2.5
Interest-free loans ............................................................................ 34.9 9.7
Cameroon (timber, cocoa) ................................................................ 3.9 0.5
Congo (timber) .................................................................................. 8.1 0
Fiji (copra oil) ................................................................................... 0.7 1.6
Ghana (timber) .................................................................................. 5.7 0
Ivory Coast (timber) .......................................................................... 16.5 0
Madagascar (cloves, sisal) .................................................................. 0 3.2
Sierra Leone (iron ore) ...................................................................... 0 4.4
' Payments are entered under the year when the trade losses occurred, not when the payments were made.
Payments were for export losses in the commodities listed in parentheses.
EC Proposals for Lome II
Several proposals drafted by the EC Commission for a second Lome Convention
have caused wrangling within the Community and are bound to stir up controversy
when presented to the ACP countries. Most hotly debated is the proposal to add
provisions on respect for human rights. The Commission hopes such provisions would
give the Community influence over human rights issues in the ACP countries and
would ensure that aid is oriented toward projects meeting basic human needs. While
the Commission has been able to delay project aid to Uganda, it would like clear
authority to cut off assistance to governments that consistently violate human rights.
The French reportedly oppose such a move as interference in the internal affairs of
the ACP countries, while the British would back even stronger measures. As a
compromise, the EC probably will make clear its intent to restrict cooperation with
violators but will not seek to establish its contractual right to cut: off aid.
The Commission also has suggested that formal trade consultation procedures be
established to forewarn the LDCs of possible EC import restrictions. The West
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Germans oppose such a mechanism on grounds that it would be viewed as
protectionist. EC Commissioner for Development Claude Cheysson argues that
"consultation" would prevent a recurrence of the bitter reaction to the EC's abrupt
unilateral restriction of textile imports last year. Commission officials also may believe
that a mechanism for handling sensitive trade problems will slow the erosion of
European public support for trade concessions to the ACP countries.
Less controversial, at least within the EC, is a Commission plan to stimulate
additional capital flows to the ACP countries by negotiating rules of conduct for both
private investors and host countries and setting up procedures for conciliation of
disputes. The Commission believes that Communtiy-sponsored risk insurance may be
needed to spur private investment in sectors of special interest to the EC such as
mining, but some member states are not willing to expand Commission authority in
this sphere.
The EC governments doubtless will endorse a proposal to "improve" guidelines
for industrial cooperation with the ACP countries. US officials in Brussels interpret
this to mean in part that future EDF support for industry should be limited to sectors
posing little competitive threat to the EC. The Commission also wants to direct more
EDF funds to the least developed countries, to regional projects, and to projects that
will attract funds from Arab development banks.
The Community wants to maintain the STABEX system essentially as is, adding a
requirement that STABEX payments be directed to commodity sectors suffering
export shortfalls. According to a Commission survey, only about 20 percent of
transfers have been used to aid producers or marketers of the products covered.
Another 20 percent have been funneled to national treasuries, and the remainder have
gone to general agriculture or infrastructure projects.
Not surprisingly, the heterogeneous ACP states are less far along than the EC in
drawing up proposals for revising the Convention. A list of objectives prepared by the
ACP secretariat, while not endorsed by ACP governments, contains a number of items
they probably will pursue. The secretariat proposes that the new agreement:
? Expand STABEX to include payments for more products, including
copper, phosphates, and rubber.
? Halt the erosion of trade preferences caused by expansion of the EC
generalized system of preferences for LDCs.
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? Increase benefits under the protocols on sugar, bananas, and rum and
extend them to beef and other items.
? Establish long-term arrangements for (a) purchasing surplus EC agricultur-
al commodities and (b) guaranteeing markets in the EC for commodities
produced with Community development aid.
The ACP countries are of two minds about the inclusion of provisions on human
rights. Some. are flatly opposed, while others think such provisions would open the
door for negotiating measures to protect ACP workers residing in the Community and
provide an opportunity to pressure the EC on what many view as Community support
for racist regimes in southern Africa,
Long Road Ahead
The ACP states also want a substantial increase in technical and financial
assistance under Lome .11, whereas the EC Commission has proposed that the
Community try to maintain the real value of the aid levels provided under Lome I.
Actual amounts will not be set until the final phase of the negotiations sometime in
1979.
Although EC-ACP meetings over the past several years have been conducted in a
friendly atmosphere, EC officials complain about the ACP governments' "UNCTAD-
like" negotiating procedures. A Commission spokesman has observed that in one sense
the Lome Convention is not "paying off" for the EC, as the ACP countries are no
more cooperative on North-South issues than the LDCs as a whole. The ACP countries
demonstrated remarkable solidarity during the negotiations for Lome I; the EC
believes ACP governments have a clearer notion of what they want this time and will
be more demanding when substantive negotiations begin in September.
CANADA: CONTROVERSY OVER AUTOMOTIVE TRADE AGREEMENT
Some government officials in Ottawa and Toronto are voicing strong concern
over Canada's $1 billion * deficit in automotive trade, Two recently released
studies-one by Ontario's Ministry of Treasury, Economics, and Intergovernmental
Affairs and one by the New Democratic Party-assert that Canada has not been
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getting its fair share of employment and investment under the 13-year-old US-
Canadian Automotive Agreement. Ontario is now considering subsidies to encourage a
larger share of automotive investment in Canada.
Background on the Automotive Pact
Canada and the United States signed the Automotive Agreement in 1965 to
rationalize North American motor vehicle production. The Agreement covers most
new motor vehicles-including passenger cars, trucks, and snowmobiles-according
duty-free status to new vehicles and parts destined for assembly. Under the pact, US
automobile manufacturers agreed (a) to maintain at least a 75-percent ratio between
production and sales in Canada for each class of vehicle and (b) to keep the Canadian
value-added proportion of Canadian-assembled vehicles at least at levels prevailing
before the pact was signed. The Agreement is of indefinite duration; each government
has the right to terminate it with 12 months' notice.
The pact governs trade in an industry that directly employs 960,000 workers in
the United States and Canada combined and accounts for $100 billion in annual sales.
The Canadian automotive industry employs 110,000 workers, mainly in Ontario and,
to a lesser extent, Quebec. Provincial officials estimate the industry directly and
indirectly accounts for 6 percent of employment in Ontario.
Production and Trade Under the Pact
On balance, Canada's automobile industry has prospered under the Agreement.
Before 1965, Canadian automobile production facilities were geared to the small,
fragmented domestic market, limiting economies of scale. Under the pact, Canadian
plants have become nearly as efficient as the larger US plants by servicing the broader
North American market, a shift that has reduced the premium paid for automobiles in
Canada relative to the United States.
Two-way trade in automotive products has mushroomed, rising from $1.1 billion
in 1965 to $19.6 billion in 1977. In the early years of the pact, the automotive trade
balance swung from large US surpluses to small Canadian surpluses. The shift followed
a surge of US investment in Canadian facilities precipitated by (a) intense pressure
from Canadian officials on US companies and (b) a substantial Canadian wage
advantage. Since 1972 Canada has once again slipped into deficit. For one thing,
investment in Canada slacked off as the wage advantage declined. Furthermore,
automobile producers began purchasing a larger proportion of parts in the United
States in reaction to a pickup in strike activity at Canadian facilities. Since the energy
crisis, moreover, Canadian domestic automobile sales have been rising more rapidly
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Canada: Automotive Trade Balance with the United States
_31 I 1 I I I I I I I I I I Parts
1965 66 67 68 69 70 71 72 73 74 75 76 77
Canadian balance ............................ 196 197 99 -425 -1,232 -1,842 -1,046 -1,023
Canadian vehicle balance .......... 1,144 1,192 1,199 979 909 662 1,471 1,925
US imports .............................. 2,038 2,511 2,778 3,061 3,482 3,726 4,840 5,636
Canadian imports .................... 894 1,319 1,579 2,082 2,573 3,064 3,369 3,711
Canadian parts balance .............. -939 -967 -1,071 -1,380 -1,983 -2,401 -2,567 -2,938
US imports .............................. 1,080 1,481 1,795 2,172 1,997 2,008 2,983 3,496
Canadian imports .................... 2,019 2,448 2,866 3,552 3,980 4,409 5,550 6,434
Canadian tires and tubes balance -9 - 28 - 29 - 24 -158 -103 50 -10
US imports .............................. 14 8 22 68 65 67 166 135
Canadian imports .................... 23 36 51 92 223 170 116 145
than US sales, leading to an increase in Canadian demand for US components and
finished vehicles. The overall Canadian automobile deficit peaked at $1.8 billion in
1975 and has held at roughly $1 billion in each of the last two years. Surpluses in
finished vehicles have been more than offset by deficits in parts.
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Net Direct Investment on Automotive Plant and Equipment'
Million US $
Canadian
Share of
Total
(Percent)
1964... _ .................... 1,439.6 1,314.3 125.3 8.7
1965 ............................ 2,155.8 1,961.6 194.2 9.0
1966... _ ....................... 1,561.0 1,420.4 140.6 9.0
1967 ............................ 1,335.0 1,245.0 90.0 6.7
1968 ............................ 1,177.4 1,127.9 49.5 4.2
1969 ............................ 1,556.7 1,484.9 71.8 4.6
1970 ............................ 1,399.6 1,285.4 114.2 8.2
1971 ............................ 1,300.7 1,244.2 56.5 4.3
1972 ............................ 1,307.5 1,257.9 49.6 3.8
1973.. .............. . ... ... .. 1,784.9 1,711.0 73.9 4.1
1974 ............................ 1,973.4 1,880.9 92.5 4.7
1975 ............................ 1,300.8 1,217.6 83.2 6.4
1976 ............................ 1,341.0 1,252.0 89.0 6.6
1965 ..................
1966 .................
1967 ..................
1968 ..................
1969 ..................
1970 ..................
1971 ..................
1972 ..................
1973 ..................
1974 ..................
1975 ..................
1976 ..................
1977 ..................
Average Hourly Earnings in the North American
Automotive Industry
Motor Vehicles Parts and Accessories
United States Canada Canada as a United States Canada Canada as a
US $ Percent of US US $ Percent of US
3.44 2.66 77 3.33 2.42 73
3.54 2.72 77 3.44 2.45 71
3.64 2.87 79 3.54 2.57 73
3.99 3.26 82 3.89 2.83 73
4.21 3.47 82 4.11 3.04 74
4.38 4.02 92 4.18 3.49 83
4.92 4.45 90 4.63 4.04 87
5.32 4.91 92 5.08 4.31 85
5.66 5.30 94 5.44 4.69 86
6.20 6.06 98 5.86 5.28 90
6.77 6.36 94 6.34 5.76 91
7.38 7.36 100 6.99 6.75 97
8.24 7.52 91 7.84 7.04 90
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The "Fair Share" Arguments
The recently released studies by the Ontario Ministry of Treasury, Economics,
and Intergovernmental Affairs and the New Democratic Party take aim at the spirit of
the Automotive Agreement; performance of US automakers under the terms of the
Agreement is not currently at issue. Both studies claim Canada has not received its fair
share of automotive industry employment, based on the growth of Canadian sales
since 1965. The Ontario study claims that if Canada's automotive industry had grown
at the same rate as sales of finished cars since 1965, the industry would have received
$814 million more in investment, $188 million more in research and development
money, and would now be employing an additional 20,000 to 25,000 people. Using a
similar approach, the NDP study indicates the Canadian parts industry should have
18,000 to 20,000 more workers. Independent parts, producers have entered the fray,
pointing to the increased share of Canadian parts production going to captive plants.
Since 1965, the independents' share of parts production has slipped from 80 percent to
60 percent.
Viewing the Studies
Even Canadian officials are aware that the assertions made in the two studies are
open to challenge. If, for example, the data are adjusted to account for Canada's parts
surplus with third countries, the deficit would have been nearly $500 million lower
Canada: Automotive Industry Employment
Canadian share of North American automotive
industry employment
1965 ............................................................................................
1976 ............................................................................................
Employment
1965- ..........................................................................................
1976 ............................................................................................
Hypothetical 1976 employment, assuming
employment grew as fast as:
North American automotive industry ..................................
North American new car sales ..............................................
Canadian new car sales ..........................................................
Total Vehicles Parts
Percent
8.8
5.0
3.8
11.1
6.3
4.8
80.9
45.6
35.3
106.8
60.6
46.2
103.8
55.2
48.6
92.8
52.3
40.5
121.0
68.0
53.0
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last year. Without the economies of scale stemming from the Automotive Agreement,
it is unlikely the Canadian parts industry would have been able to make sales of this
magnitude.
The definition of the relevant market for determining economic shares and
benefits under the Pact is critical. Canada's independent parts makers and Ontario
officials feel that the separate US and Canadian sales markets conform most closely to
the "spirit" of the Agreement and that economic activity in each country's automotive
industry should be keyed to growth in its own domestic sales market. Some officials in
Ottawa reject this concept in favor of a broader entity encompassing the combined US
and Canadian markets. Under this latter definition, employment, investment, and
research and development in Canada have exceeded market growth.
In dealing with the wide range of complaints over automotive trade, Canadian
Government and industry officials have not developed a united front. The Canadian
Automotive Parts Manufacturers Association is taking a hard line, calling for
amendments to the Automotive Agreement, including:
? A mechanism to provide for automatic negotiations to reduce the Canadi-
an deficit with the United States should it reach a certain level, say $2
billion.
? More emphasis on jobs, investment, and research and development.
? The establishment of a bilateral commission to oversee the implementation
of the Agreement and to hear grievances.
Ottawa is focusing on getting a large share of the $50 billion to $60 billion in new
investments US automakers will make between now and 1985. Trade Minister Jack
Horner is reportedly offering up to C$116 million in federal financial incentives to
obtain new or expanded production facilities in Quebec and Ontario. He claims the
incentives are necessary to offset lucrative offers currently being made by states in the
southern United States. To pacify independent parts producers, Horner announced
Ottawa is studying the possibility of setting up a special automotive investment
corporation to make or guarantee loans to Canadian parts producers. In addition,
Horner announced that Simon Reisman, who was in on the conception of the
Agreement, is undertaking a new study of the whole Canadian automotive industry.
NDP leader and MP Ed Broadbent, who represents the automotive industry city
of Oshawa, Ontario, is asking for letters of understanding from US manufacturers to
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guarantee Canada a larger share of future automotive investment and employment.
Broadbent is not suggesting a renegotiation of the basic Automotive Agreement.
After firing the opening salvo in the dispute, officials in Toronto are taking a low
profile. Ontario Treasurer Darcy McKeough has backed off some of the results of his
agency's study. Neither McKeough nor Ontario Premier William Davis will admit to
pushing for federal aid to obtain new investments, but both claim the province would
have to participate in the program if it should get off the ground.
Regardless of the outcome of the current debate, Canada will continue to account
for a substantial share of North American automobile production and investment over
the next few years. The 10-percent depreciation of the Canadian dollar since early
1977 has restored the wage advantage in Canada's automotive industry to levels of the
early 1970s. With their competitive edge restored, independent parts manufacturers
now have a better crack at the large replacement parts market in the United States
and perhaps even overseas in Japan.
BRAZIL: AGRICULTURAL POLICIES UNDER FIRE
The recent severe drought in southern Brazil is forcing a reexamination of farm
credit programs and price support policies that have favored export-oriented agricul-
tural production over production of domestic food crops. General Figueiredo, the
designated successor to President Geisel, apparently supports a change in emphasis in
order to raise income and employment among small farmers as well as to reduce food
imports. Some much needed reforms will be undertaken. We doubt, however, that the
apparent downplaying of policies stimulating agricultural exports will be permanent;
the need to obtain foreign exchange from farm exports as well as the desire to hold
down food prices will continue to militate against the domestic food sector.
Drought Relief
Brasilia's move to provide financial assistance to drought-stricken farmers is
focusing attention on Brazil's massive agricultural credit programs. In late April
Finance Minister Mario Henrique Simonsen announced an additional $500 million in
rural credits for producers of wheat, cotton, rice, corn, and soybeans to meet their
22 June 1978 SECRET
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outstanding debt obligations in the face of reduced output and earnings. The three-
point relief package includes (a) a one-year grant of up to $40 million for the most
seriously affected farmers, (b) a two-year extension on repayments of crop financing
loans, and (c) a one-year suspension on amortization payments for equipment
purchase loans. The emergency credit extensions intensified the criticism within the
government over the notoriously inefficient administration of the rural loan program.
The Rural Credit Program
Since 1969 Brasilia has increasingly relied on rural credits to spur domestic food
production, bolster agricultural exports, and limit the rise in farm product prices.
Credits are available through government programs for financing crop production and
marketing, machinery investments, pasture improvements, construction of storage
facilities, and development of new land for planting. The demand for farm credit has
exploded, rising from $2.9 billion in 1969 to $20.9 billion last year-a portion of the
rise being attributable to the diversion of loan receipts to nonfarm purposes during the
past two years. Nearly 80 percent of the agricultural loans extended last year were at
subsidized interest rates, ranging from 13 to 22 percent.
Total
Brazil: Rural Credit
Banco do Brasil
Commercial Banks
Million US $
Central Bank
1969
...................
2,880
1,583
910
3871
1970
..................
3,054
1,651
949
4541
1971
............................
3,826
2,108
1,212
506
1972
............................
4,670
2,632
1,447
591
1973
.......... ...._........_.
7,468
3,788
2,200
1,480
1974
..... ..... ........__......
11,215
6,236
3,030
1,949
1975
............................
15,901
8,850
4,077
2,974
1976
...........................
19,475
10,750
4,146
4,579
1977
..................
20,944
11,939
4,07(1
4,929
' Estimated.
Almost the entire impact of this massive credit program has fallen on export
crops. Most of the credits have gone to the large, modern producers of soybeans, cocoa,
coffee, and sugarcane. The area planted in these crops jumped from 5 million hectares
in 1970 to 11 million hectares in 1977. Annual production of soybeans rose from 1.5
million tons to nearly 12.2 million tons during the period, while sugarcane production
increased from 4.6 million tons to 7.5 million tons. The increased availability of credit
also bolstered productivity by expanding usage of fertilizers, pesticides, and farm
machinery, especially on large plantations.
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Brazil: Farm Inputs
1969 1975 Percent
Kilograms per Hectare Change
Fertilizer .......................... 18 44
Insecticide 144
........................ 1.2 1.8 50
Units Per Thousand Hectares
Tractors ............................ 4.1 7.3
78
Although the production of export crops has increased dramatically, the credit
program has had little effect in boosting domestic food production. The output of
wheat, rice, beans, and manioc has grown only slightly since 1970.
Government agricultural loans increasingly favor large export-oriented proprie-
tors. Last year, for example, the 5 percent of Brazil's landowners with the largest
farms received the bulk of the rural credits . Proprietors with less than 50
hectares-the overwhelming majority of Brazil's landowners- received practically no
public credits. These small proprietors, who also have little access to private credit,
provide most of the rice, corn, beans, wheat, and manioc for Brazil's 60 million
citydwellers.
Poor program administration has allowed serious problems of waste and ineffi-
ciency to arise. Easy availability of credit has led large farmers to make excessive use
of capital-intensive methods of crop cultivation. On the other side of the coin, the
scarcity of subsidized credit for small operators has kept their usage of fertilizer,
insecticides, improved seeds, and machinery below optimum levels.
Because of lax program accounting and enforcement standards, substantial
amounts of rural credit have been channeled into illegal, nonagricultural ventures.
Increasing numbers of large farmers are taking out rural loans bearing an interest rate
of 13 percent and reinvesting the proceeds in the Brazilian money market, earning up
to 65 percent a year. Subsidized agricultural loans are also being diverted into land
speculation, purchase of luxury goods, and investment in industrial ventures.
Price Support Programs
The poor performance in food production in 1978 is also a result of low
government support prices that have not kept pace with inflation. Producers of
domestic food crops such as wheat, corn, and rice rely heavily on government-
announced price supports in determining acreage planted. Farmers have decided to
cut acreage substantially in 1978. Wheat acreage has been reduced 20 percent as the
22 June 1978 SECRET
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Brazil: Area Harvested, Selected Crops
Food Crops
Thousand Hectares
Rice Corn Wheat Dry Beans Manioc
1970 .................. 4,979 9,858 1,047 3,485 2,025
1,095 3,743 2,050
1971 .................. 4,764 10,550
1972 . . ... 4,821 10,539 2,261 3,560 2,100
.............
1973 ................. 4,794 9,908 1,500 3,788 2,119
1974 .................. 4,463 11,262 1,820 4,293 2,008
4,136 2,098
1975 ....... ........ 5,250 10,800 2,306 4,047 2,112
1976 ................. 6,000 11,200 3,111
1977 .... 5,400 11,800 3,624 4,564 2,075
1978--- ............ 5,200 10,500 3,020 4,3W 2,100
Export Crops
Coffee Cotton Soybeans Sugarrcane Cocoa
1970 .................. 1,865 2,873 1,319 698 438
1971 ................ 2,583 2,428 1,750 685 809 445
2,631 2,400
1972 .................. 2,600 793 410
1973 ............... 1,900 2,428 3,200 509
1974 .................. 2,270 2,307 4,793 809 1,032 483
1975 ....... ..... 2,630 2,226 5,423 487
1076 ................. 1,393 1,902 6,416 1,133 490
1977 ................. 1,950 2,145 6,940 1,200 525
1978 ... ... 2,300 2,023 7,300 1,245
............ ---
announced wheat support price was raised only 25 percent, compared with the
inflation rate of 39 percent. Support prices for corn and rice increased 22 percent and
30 percent, respectively; corn acreage dropped 12 percent, and rice acreage declined 4
percent.
Outlook for Reform
In an effort to shore up lagging wheat plantings for the 1978/79 harvest, the
government recently hiked the support price from 238 cruzeiros per 60 kilograms to
249 cruzeiros, compared with 190.2 cruzeiros last year. While this move was probably
too late in the planting season to be effective, it does indicate government awareness of
the need for policy revisions. Further increases in support prices for corn, rice,
manioc, and dry beans will be needed if Brazil is to avoid costly food imports in 1978.
Earlier this year, the government also began to clamp down on rural credit
expansion. Even with the emergency drought aid, the increase in new agricultural
loans will be held to 35 percent in 1978, a slight decline in real terms. Moreover, the
Bank of Brazil has been instructed to eliminate a number of programs it is now
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funding. During the first quarter, the National Livestock Program was dropped, and
the development program for remote areas (Cerrados) stopped accepting new projects.
Brasilia also haltingly moved to curb evident abuses in the use of credit. Ceilings
have been placed on production loans to large farmers, and terms for financing new
agricultural investments have been tightened. Intense criticism from large landowners,
farm machinery makers, and agricultural federations subsequently persuaded the
government to ease investment financing restraints. Loans for the purchase of
agricultural machinery, for example, will revert to 100 percent of cost, although rates
will vary according to size of the loans.
Agricultural reform should gain momentum under General Joao Baptista de
Figueiredo, the designated successor to President Geisel. According to published
interviews, the new regime will give a higher priority to food production. Figueiredo
has already gone on record as favoring liberalized access to credit for small farmers
and a greater emphasis on production of food for domestic consumption.
Figueiredo is also expected to revamp the administration of the rural credit
program. Tentative plans call for the consolidation and centralization of farm lending
programs under a new National Agricultural Development Bank. Over the next one to
three years the bank will be expected to emphasize (a) financing rural infrastructure,
(b) developing new controls to prevent the diversion of agricultural credit to other
uses, and (c) encouraging development of agricultural cooperatives among small
proprietors to improve their access to public credit programs.
While General Figueiredo's commitment to increasing agricultural output should
result in some improvement, Brasilia almost certainly will not abandon its traditional
export orientation. The need to placate politically influential agribusiness interests
works against any drastic cut in farm credit, and anti-inflation policy precludes
massive hikes in domestic food prices. These constraints will impair Figueiredo's
efforts to untangle the inequities, disincentives, and inefficiencies of Brazilian
agricultural policy. Brazil is unlikely to become self-sufficient in wheat and other
staples during Figueiredo's administration.
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SECRET
Note
Cuba Harvests Bumper Sugar Crop
Cuba's current harvest will yield at least 7.3 million tons of sugar, a million tons
more than last year's harvest. By extending the harvest an extra month-through
June-the Cubans overcame early lags caused by heavy rains. Half a million tons will
be added to Cuba's carryover stocks, an estimated 360,000 tons at the beginning of
1978.
The bumper harvest by the leading sugar exporter (Cuba accounts for about 15
percent of free market trade) is unwelcome news for the already glutted international
market. The price of raw sugar has sunk to about 7 cents a pound from a 1974 peak of
65 cents and last year's average of 8 cents. Sugar exports will earn Cuba about $3.3
billion this year, largely because of the price of 41 cents per pound paid by the Soviet
Union for its imports under the Cuban-USSR trade agreement.
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Assessment
Center
Economic Indicators
Weekly Review
ER EI 78-025
22 June 1978
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This publication is prepared for the use of U.S. Government
officials. The format, coverage and contents of the publication are
designed to meet the specific requirements of those users. U.S.
Government officials may obtain additional copies of this document
directly or through liaison channels from the Central Intelligence
Agency.
Non-U.S. Government users may obtain this along with similar
CIA publications on a subscription basis by addressing inquiries to:
Document Expediting (DOCEX) Project
Exchange and Gift Division
Library of Congress
Washington, D.C. 20540
Non-U.S. Government users not interested in the DOCEX
Project subscription service may purchase reproductions of specific
publications on an individual basis from:
Photoduplication Service
Library of Congress
Washington, D.C. 20540
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 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
1. The Economic Indicators Weekly Review provides up-to-date information
on changes in the domestic and external economic activities of the major non-
Communist developed countries. To the extent possible, the Economic Indicators
Weekly Review is updated from press ticker and Embassy reporting, so that the
results are made available to the reader weeks-or sometimes months-before receipt
of official statistical publications. US data are provided by US government agencies.
2. Source notes for the Economic Indicators Weekly Review are revised every
few months. The most recent date of publication of source notes .is 16 February 1978.
Comments and queries regarding the Economic Indicators Weekly Review are
welcomed.
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BIG SIX FOREIGN COUNTRIES) COMPOSITE INDICATORS
Industrial Production
140
130
120.
Unemployment Rate
INDEX: 1970=100, seasonally adjusted
Semilogarithmic Scale
nited:States
Percent
JAN APR JUL OCT JAN APR JUL T N APR T JAN APR JUL OCT JAN APR JUL OCT
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1973 1974 1975 16 977 1978
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Billion US $, f.o.b., seasonally adjusted
LATEST from Previous
MONTH Month 1970
Industrial
Production
Big Six MAR 78 0.8 2.9
Consumer Prices
Big Six APR 78 0.3
United States APR 78 0.9
9.2
6.6
3 Months
LATEST MONTH 1 Year Earlier Earlier
1 Year
Earlier
3 Months
Earlier2
Unemployment Rate
Big Five
United States
APR 78 4.3
APR 78 6.0
4.2
7.1
4.2
6.3
0.5
7.6
LATEST
MILLION CUMULATIVE (MILLION US $)
Trade Balance
MONTH
US $ 1978
1977
Change
6.5
6.0
Big Six
FEB 78
5,140 7,790
3,178
4,612
6.6
8.5
United States
FEB 78
-4,518 -6,884
-3,495
-3,389
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2Average for latest 3 months compared with average for previous 3 months, seasonally adjusted at annual rate.
AVERAGE ANNUAL
Percent Change GROWTH RATE SINCE
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INDUSTRIAL PRODUCTION INDEX: 1970=100, seasonally adjusted
United States
Japan
JAN APR JUL OCT JAP+Ap Sf ovCU P 6k I 1edJb 2007/62/00N: CfA-RL/P8 1 00 02 0O0O 10004-7PR JUL OCT
1973 1974 1975 1976 1977 1978
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United Kingdom
Italy
Canada
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1973 1974 1975 1976 1977 1978
Percent
AVERAGE ANNUAL
Percent
AVERAGE ANNUAL
Change
from
GROWTH RATE SINCE
- -
-
Change
f
GROWTH RATE SINCE
LATEST
Previous
1 Year
3 Months
LATEST
rom
Previous
1 Year
3 Months
MONTH
Month
1970
Earlier
Earlierl
MONTH
Month
1970
Earlier
Earlierl
United States
APR 78
1.1
3.6
4.7
4.8
United Kingdom
MAR 78
0.6
0.6
-0.9
4.1
Japan
APR 78
-0.4
4.0
4.9
10.0
Italy
APR 78
-1.4
2.5
-2.4
-2.0
West Germany
APR 78
1.7
2.0
0.9
-8.7
Canada
MAR 78
0
3.8
1.7
0.3
France
MAR 78
2.4
3.5
0.8
11.2
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lAverage for latest 3 mon
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UNEMPLOYMENT RATE PERCENT
United States
Japan
France
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United Kingdom
Italy (quarterly)
A labor force survey based on new definitions of economic activity sharply raised the official estimate of Italian unemployment in first quarter 1977. Data for earlier periods thus are not comparable.
Italian data are not seasonally adjusted.
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1973 1974 1975 1976 1977
THOUSANDS OF PERSONS UNEMPLOYED
LATEST MONTH
United States
MAY 78
6,149
6,894
6,090
United Kingdom
MAY 78
1,366
Japan
APR 78
1,220
1,020
1,130
Italy
178
1,520
West Germany
MAY 78
997
1,040
1,012
Canada
APR 78
935
France
APR 78
1,087
1,037
1,023
NOTE: Data are seasonally adjusted. Unemployment rates for France are estimated. The rates shown for Japan and Canada are
roughly comparable to US rates. For 1975-78, the rates for France and the United Kingdom should be increased by 5 percent and
15 percent respectively, and those for West Germany decreased by 20 percent to be roughly comparable with US rates. Beginning in
1977, Italian rates should be decreased by 50 percent to be roughly comparable to US rates.
JAN APR JUL OCT
1978
1 Year 3 Months
Earlier Earlier
1,316 1,409
1,459 1,598
868 891
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CONSUMER PRICE INFLATION Percent, seasonally adjusted,
annual rater
United States
Japan
8.5
2.9 Average Annual Rate of Inflation 1961 1972 ~'?
France
4.3
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
78
9
1973 1974 1975
1976 1977 1
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NN A-8
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United Kingdom
Italy
Canada
LATEST
MONTH
APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN
1974 1975 1976 1977
Percent AVERAGE ANNUAL
Change GROWTH RATE SINCE
from
Previous 1970 1 Year 3 Months
Month Earlier Earlier2
United States APR 78
Japan APR 78
West Germany APR 78
France APR 78
0.9 6.6 6.6 8.6
-0.1 9.8 3.9 4.0
0.1 5.3 2.9 3.2
0.9 9.0 9.0 8.3
Percent
Change
f
AVERAGE ANNUAL
GROWTH RATE SINCE
LATEST
rom
Previous
1970
1 Year
3 Months
MONTH
Month
Earlier
Earlier2
United Kingdom
APR 78
0
13.3
7.9
6.4
Italy
APR 78
0.9
13.1
12.6
10.2
Canada
APR 78
0.3
7.6
8.4
8.8
2Average for latest 3 months compared with average for previous 3 months, seasonally adjusted at annual rate.
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A-9
 United States
Japan
West Germany
France
United Kingdom
Italy
Canada
' Seasonally adjusted.
78 I
78 I
77 IV
77 IV
77 IV
77 IV
77 IV
United States 78 I
Japan 78 I
West Germany 77 IV
France 77 IV
United Kingdom 77 IV
Italy 78 I
Canada 77 IV
' Seasonally adjusted.
Approved e 1
Percent Change -
Latest from Previous 1 Year Previous
Quarter Quarter 1970 Earlier Quarter
FIXED INVESTMENT '
Non-residential; constant prices
Latest from Previous 1 Year Previous
Quarter Quarter 1970 Earlier Quarter
Average
Annual Growth Rote Since
Average
Annual Growth Rate Since
-_ F ALJ 0702A000700010004-9
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Percent Change
Latest from Previous 1 Year 3 Months
Month Month 1970 Earlier Earlier'
Mar 78
Jon 78
Mar 78
Jan 78
May 78
Feb 78
Mar 78
Apr 78
Jan 78
77 IV
77 IV
Jan 78
Mar 78
Mar 78
- Seasonally adjusted.
l Average far latest 3 months compared with average far previous 3 months.
WAGES IN MANUFACTURING'
Latest from Previous 1 Year 3 Months
Period Period 1970 Earlier Earlier'
Average
Annual Growth Rate Since
Average
Annual Growth Rate since
02108 . ^fr/IA RD 80TV -
A-10
8.9 I 7.3
' Hourly earnings (seasonally adjusted) for the United States, Japan, and Canada; hourly wage
rates far others. West German and French data refer to the beginning of the quarter.
' Average far latest 3 months compared with that for previous 3 months.
percent Rate of Interest
1 Year
Latest Date Earlier
3 Months
Earlier
1 Month
Earlier
United States
Commercial paper
Jun 14
7.54 5.44
6.75
7.06
Japan
Call money
Jun 16
4.13 5.50
4.25
4.00
West Germany
Interbank loans (3 months)
Jun 14
3.58 4.20
3.50
3.60
France
Call money
Jun 16
8.00 8.88
9.12
8.00
United Kingdom
Sterling interbank loans (3 months)
Jun 14
10.16 1 7.83
6.59
9.21
Canada
Finance paper
Jun 14
8.19 i 7.22
7.55
7.97
Eurodollars
Three-month deposits
Jun 14
8.09 5.68
7.24
7.84
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US $
National Currency
Average
Average
Annual Growth Rate Since
Annual Growth Rate Since
Percent Change --
--
Percent Change
Latest
from Previous
1 Year
3 Months
Latest
from Previous 1 Year 3 Months
Month
Month
1970 Earlier
Earlier
Month
Month 1970 Earlier Earlier
United States
Mar 78
-0.1
9.3 3.8
7.6
United States Mar 78
-0.1 9.3 3.8 7.6
Japan
Apr 78
4.8
12.2 20.2
54.5
Japan Apr 78
0.3 5.4 -3.1 10.7
West Germany
Mar 78
1.0
12.0 15.6
9.9
West Germany Mar 78
-0.7 3.8 -1.5 -11.6
France
Feb 78
-0.5
11.4 9.9
22.7
France Feb 78
1.5 9.3 6.4 19.5
United Kingdom
Apr 78
-2.7
11.4 17.0
-12.7
United Kingdom Apr 78
0.9 15.3 9.0 5.7
Italy
Oct 77
-0.6
10.9 12.7
0.2
Italy Oct 77
-0.9 16.3 16.0 -0.7
Canada
Mar 78
12.8
10.1 14.7
62.2
Canada Mar 78
1.3 9.4 9.1 11.9
IMPORT PRICES
National Currency
OFFICIAL RESERVES
Average
Annual Growth Rate Since
Billion US $
Percent Change ---
- -
Latest
Month -
Latest
from Previous
1 Year
3 Months
I Year 3 Months
Month
Month
1970 Earlier
Earlier
End of
Billion US $ Jun 1970 Earlier Earlier
United States
Mar 78
2.0
13.1 7.8
27.5
United States Apr 78
18.8 14.5 18.9 19.5
Japan
Apr 78
-8.4
6.5 - 18.0
-23.2
Japan May 78
27.7 4.1 17.3 24.2
West Germany
Mar 78
1.9
3.6 - 1.9
-0.9
West Germany Apr 78
41.3 8.8 34.6 40.7
France
Feb 78
1.9
9.9 3.8
12.5
France Apr 78
10.6 4.4 10.0 0.1
United Kingdom
Apr 78
1.6
17.7 1.9
11.5
United Kingdom Apr 78
17.7 2.8 10.2 21.4
Italy
Dec 77
-0.7
19.5 9.7
-13.1
Italy Mar 78
10.6 4.7 6.4 11.6
Canada
Feb 78
0.7
9.3 16.3
22.8
Canada May 78
4.7 9.1 5.2 3.7
CURRENT ACCOUNT BALANCE '
BASIC BALANCE '
Current and Long-Term-C
apital Transactions
Cumulative (Million
US $)
Latest
Cumulative (Million US $)
Period
Million US $
1977 1976
Change
Latest
Period Million US $ 1977 1976 Change
United States 2
77 IV
-7,030 -20,115 -1,430
-18,685
United States
No longer published'
Japan
Apr 78
1,740
11,112 3,680
7,432
Japan Apr 78
2,844 7,876 2,696 5,180
West Germany
Apr 78
841
3,584 2,659
926
West Germany Mar 78
2,026 - 1,648 2,472 -4,120
France
77 IV
136
-3,179 -5,721
2,541
France 77 IV
149 -3,218 -6,842 3,624
United Kingdom
77 IV
682
-14 -2,172
2,157
United Kingdom 77 IV
1,389 5,353 -2,254 7,607
Italy
77 III
2,390
1,629 -2,028
3,657
Italy 77 III
2,520 2,128 -2,083 4,211
Canada
77 IV
-666
-4,020 -4,230
210
Canada 77 IV
-266 84 3,751 -3,667
Converted to US doll
ars at the current market
rates of exchange.
Converted to US dollars of the current market rates of exchange.
s As recommended by the Advisory Committee on the Present
ti
f B
l
f
Seasonally adjusted.
a
on o
a
ance o
Payments
Statistics, the Department of Commerce no longer publishes a basic balance.
EXCHANGE RATES
TRADE-WEIGHTED EXCHANGE RATES'
Spot Rate
As of 16 Jun 78
As of 16 Jun 78
Percent Change from
Percent Change from
us $
1 Year 3 Months
Per Unit
19 Mar 73
Earlier Earlier
9 Jun 78
1 Year 3 Months
Japan (yen)
0.0046
21.56
26.55 5.36
2.14
19 Mar 73
Earlier Earlier 9 Jun 78
West Germany
0.4771
34.72
12.48 - 1.11
-0.34
United States 0.41
-5.30 0.42 -0.42
(Deutsche mark)
Japan 26.64
24.52 6.03 2.11
France (franc)
0.2172
-1.47
7.43 0.98
-0.04
West Germany 30.58
5.14 -0.89 -0.24
United Kingdom
1.8307
-25.61
6.50 -6.64
0.24
France -8.65
-0.57 1.80 0.13
(pound sterling)
United Kingdom -29.89
0.93 -6.45 0.26
Italy (lira)
0.0012
-34.41
2.74 0.61
0
Italy -41.54
- 5.13 1.10 0.12
Canada (dollar)
0.8934
-10.45
- 5.64 -2.35.
0.07
Canada -10.41
-7.83 -2.27 -0.05
' Weighting is based on each listed country's trade with 16 other industrialized countries to
Approved For Release 2007/02/08:
l 1sRDn0T,0( 22A YGOO4oOO4m9 the major currencies.
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
Exports to (f.o.b.) Imports from (c.i.f.)
Big Other Com- Big Other Com-
World Seven OECD OPEC munist Other World Seven OECD OPEC munist Other
UNITED STATES
1975
.......................... 107.65
46.94
16.25
10.77
3.37
29.82
103.42
49.81
8.83
18.70
0.98
25.08
1976
.......................... 115.01
51.30
17.68
12.57
3.64
29.44
129.57
60.39
9.75
27.17
1.16
31.09
1977
.......................... 120.17
53.92
18.53
14.02
2.72
30.98
156.70
70.48
11.08
35.45
1.22
38.47
1st
Qtr ................ 29.46
13.75
4.73
3.13
0.86
6.99
37.37
16.07
2.76
8.97
0.30
9.27
2d
Qtr ................ 31.67
14.39
4.81
3.69
0.71
8.07
40.45
18.14
2.77
9.31
0.35
9.88
3d
Qtr ................ 28.75
12.23
4.39
3.58
0.47
8.08
39.50
17.73
2.78
8.92
0.32
9.75
4th
Qtr ................ 30.29
13,55
4.60
3.62
0.68
7.84
39.38
18.54
2.77
8.25
0.25
9.57
JAPAN
1975
.......................... 55.73
16.56
6.07
8.42
5.16
15.87
57.85
16.93
6.08
19.40
3.36
12.05
1976
...... ................ 67.32
22.61
8.59
9.27
4.93
17.84
64.89
17.58
7.78
21.88
2.91
14.72
1977
.......................... 81.11
28.02
9.73
12.03
5.32
26.01
71.33
18.87
7.93
24.33
3.41
16.79
1st
Qtr ................ 17.89
5.89
2.45
2.46
1.36
5.73
17.44
4.72
1.84
6.24
0.79
3.85
2d
Qtr ................ 19.73
6.73
2.41
2.91
1.19
6.49
17.88
4.88
2.10
5.74
0.86
4.30
3d
Qtr ................ 20.63
7.40
2.47
3.05
1.33
6.38
17.63
4.68
1.84
5.88
0.84
4.39
4th
Qtr ................ 22.86
8.00
2.40
3.61
1.44
7.41
18.38
4.59
2.15
6.47
0.92
4.25
1978 ..........................
Jan ........................
WEST GERMANY
1975 .......................... 91.70
28.33
36.44
6.78
8.81
11.05
76.28
27.09
27.78
8.24
4.87
8.21
1976 .......................... 103.63
33.44
41.86
8.25
8.72
11.04
89.68
31.28
32.64
9.73
5.93
10.01
1977 .......................... 119.28
39.01
48.00
10.78
8.59
12.90
102.63
36.38
37.37
10.12
6.14
12.62
1st Qtr ................ 28.19
9.28
11.62
2.31
2.11
2.87
24.45
8.46
8.85
2.58
1.42
3.14
2d Qtr ................ 29.20
9.59
11.79
2.69
2.07
3.06
25.21
9.09
9.04
2.43
1.54
3.11
3d Qtr ................ 28.75
9.20
11.45
2.71
2.26
3.13
25.27
8.99
8.97
2.54
1.65
3.12
4th Qtr ................ 33.14
10.94
13.14
3.07
2.15
3.84
27.70
9.84
10.51
2.57
1.53
3.25
FRANCE
1975 .......................... 52.87
20.00
15.50
4.90
3.13
8.61
53.99
23.04
14.33
9.43
1.94
5.21
1976 .......................... 57.05
22.49
16.15
5.08
3.23
8.75
64.38
27.81
16.93
11.36
2.24
6.01
1977 .......................... 65.00
25.90
18.19
5.97
3.00
11.94
70.50
30.28
18.24
11.82
2.46
7.70
1st Qtr ................ 15.68
6.25
4.55
1.40
0.75
2.73
17.89
7.50
4.84
3.06
0.52
1.97
2d Qtr ................ 16.69
6.60
4.79
1.57
0.83
2.90
17.96
7.84
4.71
2.65
0.61
2.15
3d Qtr ................ 14.75
6.02
4.08
1.32
0.67
2.66
16.14
6.99
3.85
2.87
0.62
1.81
4th Qtr ................ 17.88
7.03
4.77
1.68
0.75
3.65
18,51
7.95
4.84
3.24
0.71
1.77
1978
Jan ........................
UNITED KINGDOM
1975 .......................... 44.03
12.55
16.59
4.55
1.56
8.64
53.35
18.47
18.52
6.91
1.68
7.67
1976 .......................... 46.12
14.03
17.53
5.13
1.39
7.92
55.56
19.66
18.81
7.29
2.08
7.65
1977 .......................... 57.44
16.99
22.56
6.78
1.63
9.48
63.29
24.02
21.34
6.31
2.40
9.22
1st Qtr ................ 13.14
4.02
5.16
1.51
0.35
2.10
15.45
5.80
5.12
1.78
0.49
2.26
2d Qtr ................ 14.35
4.20
5.72
1.69
0.44
2.30
16.52
6.02
5.73
1.70
0.58
2.49
3d Qtr ................ 14.59
4.47
5.55
1.75
0.46
2.36
15.20
6.05
4.74
1.44
0.66
2.31
4th Qtr ................ 15.36
4.30
6.13
1.83
0.38
2.72
16.12
6.15
5.75
1.39
0.67
2.16
1978
Jan ........................
ITALY
1975 .......................... 34.82
15.61
7.86
3.72
2.46
4.67
38.36
17.32
6.75
7.85
2.09
4.34
1976 .......................... 36.96
17.41
8.69
4.23
2.18
3.96
43.42
19.35
8.04
8.12
2.65
5.24
1977
1st Qtr ................ 9.80
4.56
2.30
1.26
0.53
1.15
11.37
5.00
2.14
2.18
0.60
1.45
2d Qtr ................ 11.47
5.33
2.61
1.51
0.60
1.42
12.49
5.51
2.24
2.50
0.64
1.60
3d Qtr ................ 10.93
5.01
2.51
1.41
0.63
1.37
10.55
4.39
1.80
2.10
0.73
1.53
Oct & Nov ........ 7.73
3.68
1.66
0.99
0.40
1.00
7.97
3.52
1.48
1.34
0.53
1.10
Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
A-12
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
Developed Countries: Direction of Trade 1
(Continued)
CANADA
1975
..........................
1976
..........................
1977
..........................
1st
Qtr
................
2d
Qtr
................
3d
Qtr
................
4th
Qtr
................
World
Big
Seven
Other
OECD
OPEC
Com-
munist
Other
33.84
26.30
1.73
0.71
1.20
2.00
40.18
32.01
2.03
0.81
1.25
2.09
42.98
34.77
2.13
0.94
1.06
4.08
10.35
8.37
0.53
0.23
0.22
1.00
11.34
9.23
0.54
0.24
0.29
1.04
10.25
8.12
0.54
0.23
0.29
1.07
11.04
9.05
0.52
0.24
0.26
0.97
Big
Other
Com-
World
Seven
OECD
OPEC
munist
Other
38.59
29.78
1.70
3.43
0.32
2.02
43.05
33.55
1.82
3.48
0.38
2.56
44.67
35.67
1.77
3.05
0.33
3.85
10.92
8.64
0.43
0.82
0.09
0.94
12.28
9.92
0.47
0.74
0.10
1.05
10.38
8.17
0.43
0.82
0.07
0.89
11.09
8.94
0.44
0.67
0.07
0.97
Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
A-13
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
FOREIGN TRADE BILLION US $, f.o.b., seasonally adjusted
United States
14.0
12.0
10.0
2.0
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
A-14
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
1.5
JAN APR JUL OCT JAN
1973
LATEST
MONTH
MILLION
US $ 1978
1977
CHANGE
LATEST
MONTH
MILLION
US $ 1978
1977
CHANGE
United States
APR 78
11,635
42,484
39,678
7.1%
United Kingdom
MAY 78
5,231
27,077
21,791
24.3%
14,496
55,016
47,278
16.4%
5,538
27,973
24,164
15.8%
Balance
-4,933
Japan
APR 78
7,681
31,482
26,195
20.2%
Italy
APR 78
4,650
16,050
14,034
14.4%
5,229
21,575
20,236
6.6%
4,053
14,955
14,756
1.3%
Balance
2,452
9,907
5,960
3,948
West Germany
APR 78
12,015
44,720
37,423
19.5%
Canada
FEB 78
3,946
7,175
6,761
6.1%
9,694
37,286
31,124
19.8%
3,710
6,680
6,509
2.6%
France
Balance
APR 78
6,416
24,665
20,659
19.4%
6,279
24,652
21,770
13.2%
Balance
Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
A-15
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
FOREIGN TRADE PRICES IN US $1
Japan
West Germany
19Af&roved For #*ff fse 2007/02/x19?91A-RDP80TAM7A00070001 Add"44
lExport and import plots are based on five-month weighted moving averages.
A-16
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
Canada
19,aproved For t i se 2007/021b@7@IA-RDP80T -62A00070001( ZA
576287 6-78
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
SELECTED DEVELOPING COUNTRIES
MONEY SUPPLY'
Average
INDUSTRIAL
PRODUCTION '
Annual
Growth Rare Since
Average
Percent Change ._
-
Annual Growth Rate
Since
Latest
from Previous
1 Year
3 Months
Percent Change
--
-""--
Month
Month
1970
Earlier
Earlier
Latest
from Previous
1 Year
3 Months
Period
Period
1970 Earlier
Earlier'
Brazil
Nov 77
-0.2
36.6
44.6
35.8
India
Dec 77
1.0
13.8
13.6
26.1
India
Dec 77
3.3
4.7 4.6
2.5
Iran
Feb 78
0.8
28.1
27.7
30.3
South Korea
Feb 78
-2.7
22.1 21.4
23.8
South Korea
Mar 78
0.9
31.7
38.8
32.2
Mexico
Jan 78
1.3
5.9 14.3
2.3
Mexico
Feb 78
0.2
20.3
26.0
62.1
Nigeria
76 IV
0.2
11.3 9.0
0.7
Nigeria
Apr 77
-2.3
36.9
47.5
99.7
Taiwan
Apr 78
1.5
15.3 17.4
- 2.0
Taiwan
Mar 78
5.3
25.2
31.0
24.3
seasonally adjusted.
Thailand
Nov 77
3.3
13.1
12.3
4.7
' Average for latest 3 months compared with average
for previous 3 months.
I Seasonally adjusted.
s Average for latest 3 months compared with average for pr
evious 3 months.
CONSUMER
PRICES
WHOLESALE PRICES
Average
Annual Growth Rate Since
Average
Percent Change
- _--_. -
------__. "
Annual Growth Rate Since
Latest
from Previous
I Year
Percent Change -
Month
Month
1970
Earlier
Latest
from Previous
I Year
Month
Month
1970
Earlier
Brazil
Apr 78
2.4
27.8
36.5
India
Jan 78
-1.5
7.8
5.9
Brazil
Apr 78
3.4
28.2
34.2
Iran
Mar 78
2.3
12.5
17.6
India
Mar 78
0.8
8.1
-0.6
South Korea
Apr 78
-0.1
14.4
12.6
Iran
Mar 78
3.2
11.1
12.5
Mexico
Mar 78
1.0
15.1
17.5
South Korea
Apr 78
0.6
16.0
10.9
Nigeria
Dec 77
3.2
16.6
31.0
Mexico
Mar 78
2.0
16.4
17.7
Taiwan
Apr 78
1.8
10.1
7.6
Taiwan
Mar 78
1.1
8.2
1.2
Thailand
Feb 78
1.5
8.6
10.2
Thailand
Dec 77
0
9.6
7.3
EXPORT PRICES
OFFICIAL RESERVES
us $
Million US S
Average
Latest Month
Annual Growth
Rate Since
1 Year
3 Months
Percent Change
--
-----
End of
Million US S Jun 1970
Earlier
Earlier
Latest
from Previous
1 Year
Period
Period
1970
Earlier
Brazil
Jon 78
6,760
1,013
6,193
6,041
India
Feb 78
5,563
1,006
3,481
5,069
Brazil
Oct 77
-2.8
12.7
2.1
Iran
Apr 78
12,584
208
10,548
12,848
India
Mar 77
-0.9
9.6
17.9
South Korea
Apr 78
4,116
602
3,247
4,418
Iran
Mar 78
0
32.0
0
Mexico
Dec 77
1,724
695
1,253
1,654
South Korea
77 IV
4.6
8.9
8.8
Nigeria
Feb 78
4,186
148
4,937
4,373
Nigeria
May 76
-0.1
27.3
12.3
Taiwan
Mar 78
1,433
531
1,349
1,447
Taiwan
Mar 78
-0.7
11.2
3.8
Thailand
Apr 78
2,138
978
2,006
1,950
Thailand
Dec 76
2.0
13.3
13.1
Approved For Release 2007/02=$8 CIA-RDP80T00702A000700010004-9
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
Latest 3 Months
Percent Change from
3 Months 1 Year
Latest Period Earlier' Earlier 1977 1976 Change
Mar 78 Exports
-23.9
-0.3
12,137
10,128
19.8%
Mar 78 Imports
6.0
6.7
11,999
12,346
-2.8%
Mar 78 Balance
138
-2,218
2,356
Dec 77 Exports
-22.2
13.9
6,142
5,050
21.6%
Dec 77 Imports
14.4
25.9
5,365
4,548
18.0%
Dec 77 Balance
776
502
274
Iran
Mar 78 Exports
-36.7
-4.4
24,237
23,475
3.2%
Jan 78 Imports
20.5
21.0
12,561
11,513
9.1%
Jan 78 Balance
11,676
11,962
-286
South Korea
Mar 78 Exports
-36.9
28.4
10,046
7,715
30.2%
Mar 78 Imports
-5.5
29.5
10,526
8,405
25.2%
Mar 78 Balance
-480
-690
210
Mexico
Feb 78 Exports
160.3
13.4
4,092.9
3,315.8
23.4%
Feb 78 Imports
-7.4
10.4
5,487.5
6,029.6
-9.0%
Feb 78 Balance
-1,394.6
-2,713.8
1,319.2
Nigeria
Dec 77 Exports
-26.1
1.3
4,752
4,033
17.8%
Dec 76 Imports
Dec 76 Balance
86.7
8.4
N.A.
N.A.
N.A.
N.A.
N.A.
N.A.
Taiwan
Apr 78 Exports
-27.6
32.3
1,526
1,226
24.5%
Apr 78 Imports
- 14.5
20.4
1,309
1,044
25.4%
Apr 78 Balance
217
182
36
Thailand
Dec 77 Exports
-27.2
-1.6
3,559
3,040
17.1%
Jan 78 Imports
0.6
21.4
4,246
3,313
28.2%
Dec 77 Balance
-687
-273
-414
Approved For Release 2007/02/08?`:'dIA-RDP80T00702A000700010004-9
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
AGRICULTURAL PRICES MONTHLY AVERAGE CASH PRICE
$ PER METRIC TON 5 $ PER BUSHEL
14 JUN 3.02 14 JUN 2.51
7 JUN 3.12 4 7 JUN 2.55
MAY 78 3.11 200 MAY 78 2.61
5.0 JUN 77 2.31 JUN 77 2.29
A ^
150 / ^\ _ 2.55
0 1-14 JUN II 0 0 1-14 JUN II 0
1974 1975 1976 1977 1978 1974 1975 1976 1977 1978
No. 2 Medium Grain, 4% Brokens,
f.o.b. mills, Houston, Texas
$ PER METRIC TON SUGAR
75 C PER POUND
800
5 JUN
20.50
14 JUN
7.30
30.0
30 MAY
21.00
7 JUN
7.61
MAY 78
20.80
MAY 78
7.32
JUN 77
15.25
JUN 77
8.08
1-5 JUN 11
1974 1975 1976 1977 1978
1.0 $ PER POUND
Memphis Middling 1 1/16 inch
14 JUN 0.6003
7 JUN 0.5874
MAY 78 0.5940
JUN 77 0.6230
350 14 JUN 169.33
7 JUN 182.50
300 MAY 78 169.26
1,500 JUN 77 262.09
1-14 JUN II
0
1974 1975 1976 1977 1978
1-14 JUN ~~.
COFFEE
2,000 Other Milds Arabicas, ex-dock New York
TEA
London Auction
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A-20
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
15 $ PER BUSHEL
14 JUN 6.53
7 JUN 6.85
MAY 78 7.09
10 JUN 77 8.20
500
400
100
14 JUN 0.3000
7 JUN 0.3000
MAY 78 0.2847
JUN 77 0.2830
SOYBEAN MEAL
$ PER TON
400
14 JUN
163.00
7 JUN
167.00
MAY 78
176.55
320
JUN 77
216.57
240
160
169.40
1-14 JUN II
SOYBEAN OIL
Crude, Tank Cars, f.o.b. Decatur 1,000
14 JUN 0.2572
7 JUN 0.2720
MAY 78 0.2870
JUN 77 0.2708
1-14 JUN 11
1-6 JUN II
1974 1975 1976 1977 1978
100
NOTE: The food index is compiled by the Economist for 16 food commodities
which enter international trade. Commodities are weighted by
3-year moving averages of imports into industrialized countries.
200
Approved For Release 2007/02/08: OL RDP80T00702A000700010004-9
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
INDUSTRIAL MATERIALS PRICES MONTHLY AVERAGE CASH PRICE
COPPER WIRE BAR
140 C PER POUND
14 JUN 58.7
7 JUN 62.5
67.6
67.6
64.6
71.6
MAY 78 59.2
JUN 77 59.4
Us
31.0
31.0
29.0
34.0
:2,500 35
1-14 JUN II 1,000
10
ZINC
G PER POUND
100 .
14 JUN
7 JUN
25.6
27.4
25.4
TIN
650 C PER POUND
2,000
550
1,500
1,000
l"?J
US2
20
1-14 JUN II
0 1974 1975 1976 1977 1978 0 150
STEEL SCRAP
150 $ PER LONG TON
S PER METRIC TON
1,000
LME US
14 JUN 24.9
7 JUN 26.2
MAY 78 24.6
JUN 77 25.4
31.0
31.3
31.5
31.3
11 200
LME US
14 JUN 559.8 610.8
7 JUN 551.4 593.9
MAY 78 530.5 570.0
JUN 77 436.4 481.5
8,000
6,000
1-14 JUN 11 4,000
1975 1976 1977 1978
PLATINUM
$ PER METRIC TON S PER TROY OUNCE
150 250
125 225
100 200
75 175
50 150
1-14 JUN II
1-14 JUN LI_..
1975 1976 1977 1978
Approved For Release 2007/02/Q822 CIA-RDP80T00702A000700010004-9
LEAD
$ PER METRIC TON 45 C PER POUND
3,000
553.3 12,000
10,000
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ALUMINUM
Major US Producer
it per pound
55.00
53.00
51.00
44.00
US STEEL
Composite
$ per long ton
395.81
359.36
339.27
316.36
IRON ORE
Non-Bessemer Old Range
$ per long ton
21.43
21.43
21.43
19.50
CHROME ORE
Russian, Metallurgical Grade
$ per metric ton
NA
150.00
150.00
150.00
CHROME ORE
S. Africa, Chemical Grade
$ per long ton
56.00
58.50
58.50
39.00
FERROCHROME
US Producer, 66-70 Percent
It per pound
42.00
41.00
43.00
45.00
NICKEL
Composite US Producer
$ per pound
2.07
2.06
2.41
2.20
MANGANESE ORE
48 Percent Mn
$ per long ton
67.20
72.24
72.00
72.00
TUNGSTEN ORE
Contained Metal
$ per metric ton
16,520.00
21,549.00
22,821.00
13,954.00
MERCURY
New York
$ per 76 pound flask
147.00
124.33
126.23
110.00
SILVER
LME Cash
E per troy ounce
533.18
472.49
446.93
478.82
GOLD
182.19
160.45
140.78
125.71
LUMBER INDEX6
160
1,200
1,000
100
600
1-14 JUN 11
10
1976
1977 1978
300
INDUSTRIAL MATERIALS INDEX
250
1-6 JUN 11
1976 1977 1978
1-9 JUN 11
1977 1978
1Approximates world market price frequently used by major
world producers and traders, although only small quantities of
these metals are actually traded on the LME.
2Producers' price, covers most primary metals sold in the US.
3As of 1 Dec 75, US tin price quoted is "Tin NY lb composite.'
4Quoted on New York market.
5S-type styrene, US export price.
6This index is compiled by using the average of 13 types of lumber whose
prices are regarded as bellwethers of US lumber construction costs.
7Composite price for Chicago, Philadelphia, and Pittsburgh.
NOTE: The industrial materials index is compiled by the Economist for 19 raw
materials which enter international trade. Commodities are weighted by
3-year moving averages of imports into industrialized countries.
576363 6-78
Approved For Release 2007/02/08 : C,(j DP8OTOO7O2AOOO7OOO1 OOO4-9
 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
 25X1 Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9
Approved For Release 2007/02/08 : CIA-RDP80T00702A000700010004-9