ECONOMIC INTELLIGENCE WEEKLY REVIEW

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP80T00702A001000010001-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 60
• Document Creation Date: December 19, 2016
• Document Release Date: June 30, 2005
• Sequence Number: 1
• Publication Date: November 24, 1978
• Content Type: PERRPT

National
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Assessment
Center
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Mexico: Impact of Rapid Population Growth ...........................................
Explosive population growth and mass migration to the cities not only will
pose serious problems for the Mexican Government throughout the
remainder of the century but also will have spillover effects on US
Interests.
USSR: Meat Shortages Through Soviet Eyes ................. ..............
World Grain: 1978/79 a Bumper Year ...............................................
Production will be more than sufficient to meet higher levels of consump-
tion and trade.
Poland: Economic Options Narrow ..........................................................
Cuts in imports of industrial materials, made necessary by severe hard
currency payments problems, are beginning to impinge on economic
growth and production of export goods.
Taiwan: Impressive Export Gains ........................................................... ................................. 16
Benefiting from low-cost labor, sizable infusions of foreign capital, and
skillful government supports Taiwan has emerged as a major exporter of
manufactured goods-second only to South Korea among the LDCs.
Notes .............................. .........- ................... ...................................
Chinese Population Passes One Billion
Major Developed Countries Show Mixed Third Quarter Trends
East German Economy Aided by Accords with FRG
L
Note: Beginning next week, the Economic Intelligence Weekly Review will be
published and distributed on Friday rather than Thursday.
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Explosive population growth and its ramifications will constitute the most serious
complex of problems that Mexico will face during the remainder of this century. By
the year 2000, these problems will also be having serious effects on a wide range of US
interests, from illegal migration to the supply of oil.
Mushrooming population growth is straining the structure of Mexico's society and
economy and is beginning to put pressure on the political system. The situation will
get much worse before there is any chance that it will get better. The population will
nearly double between now and the year 2000. During the same period, the labor
force will more than double, the number of unemployed will increase substantially,
and Mexico City will have become by a wide margin the world's largest mass of
urbanized humanity.
Although government measures, including the judicious spending of the new oil
wealth, can do much to alleviate the situation, misguided actions-especially certain
actions that are intuitively attractive-could exacerbate the problem. The severity of
the problem will also be influenced by the ways in which the economic and social
systems themselves adjust to changing population pressures. This adjustment
process-which cannot be mapped out with much precision-will no doubt affect the
pattern of population growth itself as well as such key variables as the path of
economic growth and the relationship of economic growth to job creation.
The Coming Population Explosion
Under our low projection, population-currently at about 65 million-would
reach 110 million by the turn of the century; under the high projection, 126 million. If
the higher figure proves correct, one out of every four persons on the North American
continent will be a Mexican compared with one of every five today. Although many
demographic factors are changing in Mexico, we are confident that the actual
population will fall within the range of our two projections.
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Impact on the Labor Force
At least 23 million and possibly as many as 28 million people-roughly the
present combined population of New York and Ohio-will be added to the Mexican
labor force by the year 2000. Our projections for the total labor force in that v_ ear
range from 41 million to 46 million, depending not only on population growth but also
on participation rates, which are in turn determined in large part by the performance
of the economy.
Impact on Employment
The number of jobs created in the years ahead will largely be determined by the
rate of Mexican economic growth. Relationships prevalent over the past 25 years
indicate that each 1 percentage point change in real GNP has generated an increase in
total employment of almost one-half a percentage point. Accompanying these gains
was a 3.0-percent annual improvement in labor productivity in industry and a 2.5
percent gain in agriculture. During periods of relatively slow economic growth,
however, productivity gains slipped below the trend rates and, as a result, more jobs
were created than would otherwise have occurred. This took place between 1970 and
1975 when some 500,000 jobs a year were created; had historic productivity trends
been maintained, the gain would have averaged 300,000 annually.
To evaluate job market conditions in the years ahead we have examined three
alternative economic growth scenarios. In each instance we have varied labor
productivity to take account of differing rates of capital accumulation and of differing
demand pressure on the labor force itself. The scenarios used include:
? Historic economic growth-assuming a 6.2-percent annual expansion
between 1980 and 2000, the same rate achieved in 1951-75.
? Intermediate economic growth-assuming an 8-percent expansion.
? Nigh economic growth-assuming a 10-percent expansion.
Mexico's actual growth performance is more likely to approximate the intermedi-
ate scenario than either of the other two. At least through the 1980s, and perhaps
beyond, Mexico's oil potential will provide much of the wherewithal to assure rates of
economic growth appreciably above those achieved between 1950 and 1975. Sustained
expansion on the order of 10 percent annually could be achieved only if the
government were willing to accept very high inflation, attributable to shortages of
skilled labor and inadequacies in infrastructure.
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The historic economic growth pattern points to continued rapid increases in
unemployment throughout the next two decades. Unless more jobs are created than
this scenario suggests, the number of unemployed would increase by 500,000 persons a
year in the 1980s and 700,000 persons in the 1990s. Under this model, the number of
unemployed would reach 12 million by the year 2000-about equal to the entire work
force in 1970-yielding an unemployment rate in the 30-percent range.
Real GNP growth of 10 percent a year would generate approximately 1 million
new jobs annually in the 1980s, rising to about 2 million a year in the 1990s. Led by
rapid growth in construction, gas, and petroleum, industrial jobs would be expected to
increase almost 9 percent yearly over the entire period. Based on past relationships,
nonindustrial urban jobs would increase about 4 percent annually; since this scenario
incorporates agricultural growth 38 percent above the long-term trend, employment
in this sector is projected to rise rather quickly. If the skilled labor bottleneck can be
overcome, unemployment would peak at 12 percent in 1985, fall to 7 percent by 1990,
and be eliminated before the turn of the century. Under this highly optimistic
scenario, the number of unemployed would. rise to 3 million in 1985 and then
gradually fall until a labor shortage were created by the turn of the century. As the
bulk of the new jobs would require high skills, acute shortages of skilled labor would
probably coexist with- high levels of unemployment among the unskilled.
Under the intermediate economic growth scenario-which probably best charac-
terizes the growth pattern Mexico will experience-new jobs will expand by 3.5
percent yearly in the 1980s and about 4 percent in the 1990s. Over 700,000 new jobs
will be created yearly in the 1980s and 1.2 million per year in the 1990s, with more
than half the additional positions concentrated in the industrial sector. Under this
scenario, 10 million new skilled workers would be required to sustain growth over the
next two dozen years-roughly the number that the school system should be able to
produce.
Nonetheless, the number of unemployed would continue to grow, reaching 5
million in 1990 and 7 million to 8 million in the year 2000. By 1990, unemployment
rates would rise to 17 percent. After 1990, the rate of population growth in the
previous decade will determine whether new entrants to the labor force will lag or
lead job creation. Under low population growth, the unemployment rate would slip to
16 percent in 2000; with high population growth, it would climb to 19 percent. Again
changes in labor productivity could exert a strong influence on these patterns. If labor
productivity increases 1 percentage point less than our calculations assume, of course,
total employment in each case would increase 1 percent faster than indicated.
In the intermediate growth case, as in the other two, unemployment will continue
to be concentrated among urban workers, women, and the uneducated through the
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remainder of the century. Underemployment, particularly pronounced in the agricul-
tural and service sectors, will decline, especially in rural areas, where we expect
commercial farming to increasingly displace subsistence and quasi-subsistence
agriculture.
I nipact on Urbanization
An extremely serious aspect of Mexico's demographic problems will be the rapid
and (so far) uncontrolled urbanization. Greater Mexico City, already with 14 million
inhabitants, would have more than 40 million people in the year 2000 if it continued
to grow at current rates. Even if all migration into the city were to stop this year,
natural growth would give the city a population of between 23 million and 27 million.
The valley where Mexico City is located does not have the land and water
resources to support a population of much over 20 million. Accordingly, rural-urban
rn igration must be redirected and some interurban migration must take place. Given
the average Mexican's predilection toward life in the capital-which shows no signs of
lessening despite a sharp decline in the quality of life in Mexico City-the government
will have to make heavy use of both sticks and carrots to force such changes. If
successful, such a government effort will have spread rather than solved the problems
of rapid urbanization. If the redirection of population movements were to be
concentrated on the eight largest urban areas apart from Mexico City-as is most
likely-the population of these cities would rise four and one-half times, with
predictable effects on urban services and welfare.
Rural population is expected to grow slowly, if at all, during the next two decades.
Slower population growth in the countryside, combined with expected oil-financed
expenditures on education. health care, and basic infrastructure, should allow a
substantial improvement in rural living conditions. Even so, employment opportuni-
ties will continue to be much greater in urban than in rural areas.
Impact on US Interests
Political Stability
On balance, we believe that the Mexican political system will be able to cope with
the strains induced by rapid population growth and urbanization. The system
ives each Mexican president almost total control over
rewards and punis ments in Mexican society for a six-year period. At the end of that
period, a massive turnover in government allows a new group to come to the fore.
Given the persistence of patron-client relationships and lack of class feeling that
characterizes Mexican society (e.g., even the poorest Mexican puts more faith in
"connections" than in mass action to improve his lot), this system provides rather well
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for the perceived needs of Mexicans of all classes. Moreover; the existence of large oil
revenues-while in themselves not without dangers for political and social stabi-
lity-will give the Mexican Government additional resources to manage pressures as
they arise.
At the same time, we believe that the threats to orderly government will be
greater than at any time since the 1930s. These threats will come not from the masses,
but from the
politically relevant upper third of the population. This group-including the middle
class, organized labor, government and opposition politicians, and the intellectual
establishment-could number more than 40 million at the turn of the century. Given
its vastly increased size, this segment of the population will be more difficult to control
and satisfy through traditional methods.
Hasty and ill-considered attempts at reform would almost certainly exacerbate
this situation. Indeed, Mexican Government officials are well aware of this danger.
They foresee a time, possibly in the early 1980s, when the growth of oil production
may have to be curbed in order to avoid inflows of wealth that would undermine the
official party's near monopoly of rewards and punishments. In the unlikely event that
the present system collapses under the new strains, it almost certainly will not be
replaced by a US-style democracy but rather by a harsher dictatorship or by a series of
swiftly changing unconstitutional governments on the South American model.
Illegal Migration
If present trends continue-that is, if the same proportion of the labor force
migrates to the United States and the same proportion of migrants remain permanent-
ly in this country-the annual flow of Mexican illegals to the United States will be 2
million persons by the year 2000 and the stock of Mexican illegals in this country will
number 5 million to 8 million. Present trends are unlikely to continue, however, and
the actual situation will probably be either much better or much worse.
On the negative side, the pool of potential migrants will have at least doubled
and, given certain not unlikely assumptions, could be five times as large. Not only will
the size of the labor force have increased but also the lack of knowledge and the
cultural inhibitions that restricted the flow in the past will have lessened. Unemploy-
ment will rise at least through the 1980s, and the wage differential between Mexico
and the United States is unlikely to diminish. Moreover, an increase in political
instability-should it come to pass-would probably be reflected in greatly increased
pressures for both legal and illegal migration. In any event, an increasing proportion of
the new illegals will remain permanently in the United States, whereas in the past the
overwhelming majority of migrants returned to Mexico after a short period.
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On the positive side, oil-led economic growth will be providing good job
opportunities for increasing numbers of ambitious Mexicans. It is precisely this
group-and not the unemployed-that are most likely to migrate. We believe that a
prolonged Mexican economic boom could have an effect on illegal migration far
greater than the number of jobs created would indicate. This effect would be
essentially psychological, as an increasing number of potential illegals would perceive
Mexico to be "where the action is." At the same time, a shortage of young workers in
the United States could lead to a marked increase in temporary legal migration. If an
economic boom in Mexico coincided with the adoption of "guest-worker" program in
the United States, an absolute decline in the size of the illegal migration flow would
probably follow.
Oil Supplies
Mexico's exports of oil and gas in the years ahead will depend heavily on the
amount of energy needed to spur economic growth and job creation at home.
Economic growth well above the historic average appears likely through the mid-
1980s; thereafter the rate will depend on a variety of factors that must be assumed
rather than predicted. These factors include (a) the world economic situation, (b) the
evolution of Mexican economic policy, (c) the possibility of skilled manpower
constraints, (d) the political situation in Mexico, and (e) technological developments in
Mexico, especially in the energy sector.
After weighing these uncertainties, we judge that Mexico will not be in a position
to export extremely large amounts of oil to the United States at the turn of the century.
Under our intermediate econoimc growth scenario, Mexico would require between 7
million and 10 million b/d of hydrocarbons (oil and natural gas in terms of oil
equivalent) in 2000, of which between 5 million and 7.5 million b/d would be oil. The
lower figures assume effective conservation and some increase in the use of
tionhydrocarbon energy sources. Under these conditions, we doubt that Mexico would
be willing to export more than a million or so barrels of oil per day.
If, on the other hand, Mexico is only able to match historic economic growth rates
over the entire period 1978-2000, domestic hydrocarbon consumption could be held to
between 5 million and 7 million b/d, of which between 4 million and 5.5 million b/d
would be of oil. Such rates of consumption would allow substantial exports of oil at
least through the first decade of the next century, if the 200 billion barrel potential
reserve figure quoted by President Lopez Portillo is proved up through additional
exploration. The relatively low economic growth rate required by this scenario would
have a serious negative impact on other US interests, including political stability and
illegal migration.
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USSR: MEAT SHORTAGES THROUGH SOVIET EYES
Although the Brezhnev regime has made considerable progress in meeting its
commitment to upgrade the Soviet diet, meat shortages remain a major source of
dissatisfaction among the Soviet populace. These shortages have required heavy
expenditures of hard currency for Western feedgrains, especially following poor
domestic harvests. This article describes some of the effects on the Soviet consumer
of severe meat shortages following the sharp decline in grain output in 1975.
insights into the effect on the Soviet consumer of the recent severe meat shortages.
Th,-.v.ql-,n reveal a wide variety of official and unofficial responses to the proble
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in general as deeply dissatisfied with the shortages,
widespread complaints only occasionally boiled over into overt protest. One essential
factor in keeping the lid on civil discontent was continued access to meat supplies in
the collective farm market (CFM), even though there was an increasing spread
between CFM prices and lower fixed prices in state stores.
ndicates that the time is indeed ripe for the
current ]Kremlin campaign to encourage growth in the private farm sector.
Background: Drop in Supplies
After an initial round of distress slaughtering which temporarily raised meat
output, per capita production in 1976 dropped below the level achieved in 1971. Meat
shortages were frequent and widespread, especially in 1977, occurring both in small
cities and towns and in the major cities. Livestock herds finally have been rebuilt so
that by the end of 1978 per capita meat output should exceed the levels reached in the
early 1970s. Meat shortages are still common, however, and the gap between supply
and demand promises to widen as increases in personal money incomes continue to
outstrip growth in meat output. It is thus important to review how well individuals
and the regime coped with the last period of unusually stringent supplies and to what
extent temporary policy responses are becoming institutionalized.
Severity of Shortages and Proffered Causes
most severe shortages began early in 1976 and
continued through at least the fall of 1977. iminished
supplies but also of the complete absence of all kinds of meat in state stores for two or
three weeks at a time. Even when meat was available, the supply did not last beyond
noon. The quality was poor and bones could easily make up more than half of an
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individual's purchase. Beef was in the shortest supply
Two groups of people fared better than their fellow citizens-residents of the
Baltic republics and of most rural areas throughout the country.
The reluctance of the average Soviet citizen to believe official propaganda is
illustrated "What was the cause of the meat
shortage?" Conceding that the press had given a perfectly logical explanation-that
the weather had cause a harvest failure-they went on to offer what they considered
the "real" causes:
? Meat was exported to the West for hard currency.
? Meat was exported to Cuba and Vietnam.
? The best cuts were delivered to party and government leaders.
Brezhnev took it for his brothers."
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? Large amounts of meat were canned and stored for defense needs.
? The shortage resulted from poor farm management.
Response to Shortages
Although meat consumption appears to be the major measure of Soviet affluence,
the consumer's response to the 1976-77 meat shortages was typically stoic. Public
disturbances were minor and were apparently quelled quickly and easily. Several
strikes were reported, but much of the protest took the form of pranks rather than
serious labor disruptions. reported a newspaper photo of
Brezhnev posted in several train stations along with mug shots of wanted criminals
with the subtitle, "He stole our meat."I laimed that cars loaded with
Lithuanian meat destined for shipment from Lithuania to the Russian Republic were
welded to the tracks by local citizens.
We have no evidence of a strong coordinated effort by the central government to
alleviate the situation. The only nationwide effort reported was a fish day in
restaurants, ostensibly for dietary reasons. All other official efforts could be described
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as originating from local governmental, trade, or plant authorities. A common practice
was to limit meat sales at state stores, the limit ranging from 1 to 2 kilograms per
purchase. A bigger purchase was sometimes allowed for large families, pensioners, or
disabled war veterans. This practice was only partially effective since many customers
queued up again. State industrial managers made a genuine effort to supplement and
regularize meat supplies for their employees. It was in their interest to do so since their
workers were forced to miss work if they were to be successful in getting meat from
the state stores. eported that canned meat was sold in the
canteen of the coal mine. On major holidays in one Moldavian town, selected state
enterprises bought pork and beef directly from the farms and sold it to their
employees at a 50-percent discount. A ration card system was set up at some plants
entitling each worker to about 3 kilograms per month. The coupons were transferable,
which immediately created a black market in coupons.
Individual efforts to improve meat consumption included the age-old systems of
bribes, barter, resort to the CFM, and the private plot. Persons with valuable skills,
such as bricklayers, claimed to be able to trade their services for meat, and meat store
personnel were usually vulnerable to under-the-table offers. Although they com-
plained about the high prices, 0 depended heavily on the CFMs as a reliable
alternative source. Several localities attempted to place a ceiling on the CFM price,
but it was lifted when the peasants refused to sell their meat. 25X1 C
acknowledged that the acquisition and maintenance of private livestock posed
constant problems, those fortunate enough to own a hog, cow, or some poultry felt
justified in view of the tight supply situation. n a wide range of occupations 25X1 C
and living conditions owned livestock. Some reporte a definite liberalization in the
official attitude toward private farm output since 1975, but others detailed repressive
measures such as the confiscation of pigs, presumably to help fulfill local farm targets.
If these attitudes and events can be regarded as fairly typical of the general Soviet
populace, the leadership learned a good deal from the last period of meat shortages.
First, the Soviet consumer, even in this day of rising expectations, continues to be
docile and long-suffering in an area that is vital to improving his living standards.
Secondly, informal rationing systems administered at the local level work fairly well
and seem much less disruptive than would a national system. And finally, an
unfettered CFM and an expanded private farm sector drains off excess purchasing
power and energies that might otherwise be used on activities than run counter to
government policies.
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WORLD GRAIN: 1978/79 A BUMPER YEAR
Grain production ** will be more than sufficient to meet higher levels of
consumption and trade in 1978/79 so that additions to global stocks can be expected.
Despite increased foreign competition, the US share of world trade in wheat and corn
probably will show little change.
Record Supplies and Consumption
World grain production for 1978/79 is forecast at a new high of 1,160 million
tons, 80 million tons above 1977/78 and 40 million tons above the previous record set
in 1976/77. Gains are equally divided between wheat and coarse grains.*** Produc-
tion is expected to equal or exceed last year in every major region of the world. The
I:C and USSR will register the largest gains. An increase in the area sown to grain and
very favorable growing conditions are the major factors underlying this optimistic
production forecast. Estimates for Northern Hemisphere crops are relatively firm,
estimates for Southern Hemisphere crops remain tentative.
Plentiful grain supplies, rising incomes and population in LDCs, and expanding
livestock programs will push consumption of both wheat and coarse grains to new
highs in 1978/79. Consumption will still fall short of production, particularly for
coarse grains, permitting an addition to Free World stocks for the sixth consecutive
year. Soviet wheat stocks could be built up substantially and Chinese stocks slightly if
imports into the USSR and the PRC approximate our forecast. A net addition to US
stocks will be possible, a large addition to coarse grain stocks more than offsetting an
estimated 20-percent decline in wheat stocks. The US share of Free World stocks of all
grains will stay at 40 percent.
Import Demand Still Strong
Despite an outstanding production year, we forecast global grain trade in the
marketing year ending 30 June 1979 (MY 1979) will be slightly above the previous
high of 156 million tons in MY 1978. Import demand for wheat will be down less than
a million tons, more than offset by an expected rise in import demand for coarse
grains of almost 2 million tons. Although US exports will face stiffer competition, the
US share of the world wheat market is expected to hold about 45 percent, with a slight
drop in the share of the corn market, to 75 percent.
Foreign demand for US wheat, currently stronger than a year ago, can be
expected to slacken by early 1979 as larger Southern Hemisphere supplies become
*** Coarse grains include corn, sorghum, barley, oats, rye, millet, and miscellaneous grains.
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World Grain: Production, Consumption, and Stocks
900
World Wheat and Coarse Grains' Supplies
I I I I I I I I I
Free World Ending Stocks
15
B 1 d States
I I I I I I I I
0
1970/71 71/72 72/73 73/74 74/75 75/76 76/77 77/78 78/79
Prelim. Forecast
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Million Tons
1977
19782
1979'
Wheat
World ....... _ ...............
66.4
61.0
72.4
71.6
Of which:
United States ....
31.5
25.7
31.3
32.4-34.3'
Corn
World ........_ ..............
52.5
54.3
59.2
60.2
Of which:
United States s ..
40.0
42.8
45.6
45.4
Marketing year ending 30 June of stated year.
Preliminary.
Projected.
The United States as residual supplier.
Including major products.
available and as the EC continues to subsidize wheat exports. US exports in MY 1979
are expected to exceed last year's level by more than 1 million tons. Total world trade
in corn during MY 1979 is forecast to increase slightly, lower Soviet demand being
more than offset by larger Chinese purchases.
,ess is known than a year ago about Soviet intentions for buying US grain above
the US/USSR Long Term Agreement minimum of 6 million tons. We estimate that
Soviet MY 1979 grain imports will be about 14 million tons, nearly 25 percent below
last year. US shipments to the Soviet Union are expected to fall to 9.5 million tons due
to a 2.7 million ton drop in corn shipments. On the other hand, China is expected to
import large amounts of US grain-3.2 million tons of wheat and about 3.0 million
tons of corn-for the first time since MY 1975.
11S grain export prices for wheat and corn are expected to remain above MY 1978
and to hold relatively stable through early 1979. Although Southern Hemisphere
supplies could exert downward pressure on prices, this will be moderated by strong
foreign demand.
The Polish leadership faces rapidly narrowing options in dealing with its serious
hard currency payments problems. Exports to the West are sluggish and are expected
to remain so. Meanwhile, continuing sharp cuts in imports of industrial materials are
beginning to impinge on growth and production of export goods and, perhaps more
important, have reportedly led to dissension between Party leader Edward Gierek and
other members of the Politburo. Warsaw, in addition to seeking a sizable long-term
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loan in the West to cover next year's current account needs, may also be seeking a
"political commitment of aid" from the West that would enable it to deal with its
pressing economic problems on a more continuing basis. If unsuccessful, it may have
to seek a rescheduling of part of its debt. Barring any major political upheaval, the
USSR is unlikely to come forward with another large aid package.
External Position Improves
Poland has managed to cut its deficit with the West, mainly by curbing imports.
Imports from the West were down 7.6 percent during the first eight months of 1978
(compared with the first eight months of 1977), following a 4.3-percent decline last
year. A 5-percent reduction for 1978 as a whole seems likely. Real imports will have
fallen considerably more, perhaps by as much as one-fifth for 1977 and 1978
combined, because of the global inflation. Most of the cuts since 1976 have been in
machinery and equipment and in metallurgical products, mainly steel. Cuts also have
been made in imports of chemicals and light industry products.
Mainly because of continued lackluster Western economic growth, Warsaw is
having increasing difficulty in sustaining its export drive in Western markets. After a
12-percent advance achieved during the first quarter, the growth of exports to the
West fell below an 8-percent annual rate by the end of August. Some exports have
actually dropped, including exports of coke, petroleum products, rolled steel, metal
products, rayon and synthetic textiles, and leather footwear. Even so, Poland may still
be able to boost exports by 10 percent in 1978-permitting a reduction in the trade
deficit with the West to $1.3 billion; the current account deficit would then drop to $2
billion, down from the record level of $3.4 billion in 1976 and the $2.6 billion of 1977.
Despite the reduction in the deficit with the West, debt service payments
continue to soar. Projected 1978 payments of $3.2 billion are double payments in 1976
and are equivalent to 60 percent of Polish merchandise exports to the West. In 1976,
the ratio was 37 percent. Poland has aggravated its debt service problems by
borrowing short to pay long, relying more on shorter term commodity credits and less
on longer term machinery credits. Western creditors, especially those in the private
sector, are becoming increasingly cautious in lending to Poland. Many Western banks
now claim that they will lend to Poland only as only as old debts are retired.
... And the Cost is High
Cutbacks in imports of raw materials and intermediate products already appear
to be contributing to a drop in industrial production. Growth of output fell from 9
percent in 1976 to 8 percent in 1977 and is expected to decline further, to only 6
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percent, in 1978. Growth in the fuels and power, machine-building, and chemical
industries has slowed considerably. Output of such products as pesticides, nitrogen
fertilizers, polyethelene, cellulose, cotton and synthetic fabrics, leather footwear,
trucks, and ships has actually declined.
The Poles have been able to sharply reduce imports of Western machinery and
v(juipment and steel without any immediate adverse impact on industrial growth. The
roughly one-fourth cut in imports of machinery and equipment since 1976-although
contributing heavily to the drop in industrial investment-should have little adverse
impact on near-term economic growth because of unused industrial capacity and the
large amount of uninstalled equipment. The recent initiation of production at the
Katowice steel combine has added substantially to Poland's steel capacity.
As part of its import-reduction drive, Poland has imported no meat so far this
year. To help build up Christmas supplies and ease consumer complaints, however,
the regime reportedly is buying beef abroad. But imports will be less of a help than
last year, when they accounted for about 6 percent of total supplies; furthermore
Warsaw has expanded meat exports-cut back in 1976-77 to bolster domestic
supplies-in order to gain hard currency and hold onto hard-won Western markets.
The regime has kept grain imports up in order to maintain its livestock expansion
program. Poland imported 7 million tons of grain in marketing year 1977/78 and is
expected to import 5 million to 6 million tons in 1978/79. The Poles are seeking $500
uiillion to $600 million in new US Commodity Credit Corporation credits to help
finance these purchases ($200 million of these credits have already been extended).
Because of large imports of grain and feedstuffs in recent years, livestock herds were
largely rebuilt by mid-1978; cattle numbers were only slightly below the June 1975
record of 13.3 million head, and pigs were slightly above the record 21.5 million
reached in 1974. Nevertheless, per capital meat consumption still has not topped the
1975 level of about 70 kilograms a year because of population growth and reduction of
slaughter to rebuild herds. Meanwhile, money incomes are rising faster than planned,
adding to the pressure on meat supplies.
Outlook: Tough Choices Ahead
In its efforts to ease its hard currency problem, Warsaw apparently intends to
tighten its austerity program. This will test its ability to cope with the country's
economic problems while minimizing consumer unrest. Despite 1978's improvements
in the trade and farm sectors, economic conditions will remain a threat to regime
stability.
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Sharp disagreement exists within the Communist Party over Gierek's policy of
further cutbacks in imports.
Meanwhile, real imports from the West reportedly are to be trimmed by at least 5
percent in 1979, bringing the total reduction in real imports since 1976 to roughly one-
fourth. Warsaw simultaneously will try to expand real exports by 8 to 9 percent, a goal
almost certainly doomed to failure, especially given the cuts in imports of raw
materials and semifinished manufactures.
Poland's problems will be compounded if the Soviets do not allow the Poles to run
a large tirade deficit in 1979. Warsaw reportedly is counting on running a $500 million
deficit with the CEMA countries as a group. Meanwhile, the hard currency debt
service burden will continue to grow, perhaps consuming as much as four-fifths of
mechandise exports to the West in 1979.
Reduced imports of Western machinery and industrial materials and the
slowdown in investment will further hobble economic growth. Polish planners forecast
an increase in industrial production of about 5 percent in 1979. Although details of
next year's plan are still being thrashed out, the "economic manuever" initiated in
1977-the priority placed on production of export and consumer goods at the expense
of investment in heavy industry-is certain to continue. Prospects are particularly
gloomy for import-intensive industries like shipbuilding, chemicals, and machine
building. Where possible, the planners will shift domestic output of intermediate
goods to these industries or try to obtain the necessary inputs from the USSR.
Polish planners anticipate that, while consumer money incomes will continue to
rise, real incomes will fall off in 1979 and be held at reduced levels for the next two to
four years. The regime apparently intends to continue to raise food and consumer
prices, thereby relieving pressure on the state budget. (Some 15 percent of the budget
is spent on subsidizing food prices alone.) At the same time, Warsaw will continue to
boost production of goods and services for the domestic consumer, partly by
encouraging expansion of the private sector in agriculture, services, and retail trade.
But Warsaw will have a hard time selling this stepped-up austerity package to a
population already demanding more than the government can deliver.
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The Gierek regime may soon have to reconsider its options. A Polish planning
official recently stated that his country may require "a political commitment of
aid"-in the form of reduced trade barriers and financial credits-from the West in
order to avoid import cuts so severe as to result in a disruption of the economy and
serious consumer reaction. The Poles are now seeking a large long-term balance-of-
payments loan from Western banks for use in 1979. If such a credit is not forthcoming
or is not as large as hoped for, Poland may well have to seek rescheduling of part of its
debt; this judgment assumes that the Soviet leadership will not come to Poland's aid
with large-scale assistance.
Working with inexpensive labor, large infusions of foreign capital, and govern-
inent-supported development programs, Taiwan has entered the big league as an
exporter of manufactured goods. It will export more than $12 billion worth of
merchandise this year-85 percent manufactured goods-and capture an impressive 2
percent of developed country import markets for manufactures. Among the less
developed countries (LDCs), its foreign sales of manufactures rank second only to
South Korea.
Taiwan is gradually moving away from its current big money earners-textiles,
clothing, footwear, and electronics-into more capital-intensive, technologically ad-
vanced products such as automobiles, petrochemicals, and whole plants. Taipei is
pushing hard for development of advanced export industries by giving financial
breaks to firms that produce in these areas.
Export Performance
Taiwan's export performance over the last decade is the envy of most other
I .JDs. Foreign sales have grown at a 30-percent average annual rate during the 197 0s,
from only $1.4 billion in 1970 to more than $12 billion this year.
Taiwan's big money earners continue to be items traditionally associated with
Asian LDCs such as textiles, clothing, and small electrical products. This year Taiwan
will sell about:
? $2 billion worth of clothing, up from $200 million in 1970, mainly
synthetic shirts and outerwear.
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Taiwan? Commodity Export Trends
Dollar Value Index: 1973=100
ioo
I I I I I I I I
II
1973 74 75 76 77 1973 74 75 76 77
23 November 1978 SECRET
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? $1 billion in textiles, principally to Hong Kong and the United States.
? $2 billion in electrical machinery and consumer appliances, including
television sets. Most leading US and Japanese producers have been manufac-
turing electronic equipment in Taiwan for more than a decade.
? $1 billion worth of footwear, primarily to the developed countries. Because
of an orderly marketing agreement with the United States, footwear sales are
now concentrated in medium- to higher-priced shoes and boots in contrast to
the $1 to $2 plastic shoes and clogs which were the industry's mainstay only
three years ago.
These four categories currently earn about $6 billion annually, up from less than
$ i billion in 1970. Most firms in these industries are small, yet are equipped with the
most modern machinery. Taiwan's textile industry, for example, uses the most up-to-
date spinning and weaving equipment available, purchased mainly in the United
States and Japan.
Even more impressive trade gains have come in new product lines such as metal
manufactures, office equipment, and machinery.
? Exports of metal manufactures-expected to be $420 million in
1978-have grown at an average 45 percent annual rate over the last five
years, reflecting sharply increased orders from Taiwanese construction firms
operating in the booming Middle East market.
? Sales of office machinery (including minicomputers) and consumer elec-
tronics now total $800 million annually, up from only $100 million five years
ago. The increase comes mainly from the burgeoning hand calculator
market. Texas Instruments, Hewlett-Packard, and Fairchild Industries all
have assembly operations in Taiwan, and Philips recently opened up a plant
to produce integrated circuits. Taiwan has also moved heavily into digital
watches (70 percent annual export growth since 1970) and scientific hospital
equipment.
? Whole plant exports (mainly textile, footwear, and steel rolling plants)
grew 40 percent last year in response to strong demand from other Pacific
Basin LDCs and should total $330 million in 1978.
Most of these newer high growth industries operate with technology imported from
the United States and Japan and are more capital-intensive than Taiwan's traditional
export industries.
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Taiwan: Selected Exports by Destination, 1977
United States
Japan
European Community
[ITT] Other Developed
1771 OPEC
[_____71 Non-OPEC LDCs
Clothing
US $ 1,770 Million
Footwear 4.7%
7.8%
0.5%
Electrical Machinery
US $ 770 Million
25%
Textiles
US $ 31C Million
Wood Manufactures
US $ 328 Million 10.6%
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Among the LDCs Taiwan is second only to South Korea in terms of market share
in the OECD countries. Taiwan's exports account for 2 percent of OECD imports of
manufactures and 20 percent of total LDC exports to the developed countries.
Taiwan is the leading LDC supplier in the US market, exporting $3.5 billion
worth of manufactures to this country last year-more than 4 percent of US imports of
Manufactures. The island holds dominant positions in:
? Footwear-24 percent of the US import market-with a heavy emphasis
on the rapidly growing market for sporting gear.
? Clothing-17 percent of the US import market-consisting mainly of
casual wear.
? TVs, radios, and CBs-12 percent of the US import market. Taiwan is
second only to Japan as an exporter of these items to the United States.
Taiwan will sell nearly 1.5 million color TV sets and chassis in the United States this
year. These sales were given a boost by the 1977 accord under which Japan agreed to
limit color TV shipments to the United States to 1.75 million annually.
With annual imports of about $600 million, Japan is Taiwan's second largest
foreign customer for manufactures. Taiwan supplies nearly 20 percent of Japanese
shoe imports and 12 percent of clothing imports. Overall, Taiwan furnishes 4 percent
of Japanese manufactured imports. Taiwan has recently scored impressive gains in
chemical sales to Japan mainly as a result of Tokyo's decision to export pollution-
producing petrochemical operations to countries, such as Taiwan, that are less
concerned about the environment.
Japan also relies heavily on Taiwan to supply Western-style furniture, which is
rapidly becoming popular with the Japanese. In addition, Japan uses Taiwan as a
supplier of components for TVs, radios, and watches. More recently, Taiwan has
begun to supply the Japanese market with auto parts.
Taiwan's sales of manufactures to Western Europe and Canada totaled $1.7
billion in 1977, 18 percent of Taiwan's exports. The island exported $1.2 billion to the
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Taiwan: Shares of Manufactures Import Markets in Selected Countries
United States European Community'
1970 -] 6.4 percent 1.9
Footwear
1977 23.7
11.6
5.8
P81
4.0 0 Electrical Machinery
7.5 h'2
1.3
117.9
119.6
118.7
1 17.2 13.9
111.1 Wood Manufacturing 0'8
116.1 5.3
------------
1 1.5 3.8
113.5 17.1
7.5 9.5
6.9
3.1 5.2 1.3
-1
1 Excludes intra-EC Trade.
2lncludes: The United States, Canada,
Japan, The European Community,
Sweden, Switzerland, Austria, and Norway.
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EC last year and held a 1.2-percent * share of EC manufactured imports. West
Germany was the biggest customer, buying more than $500 million in Taiwanese
products in 1977, notably footwear, furniture, TVs, radios, and phonographs. Taiwan
has about a 3-percent share of the import markets of the United Kingdom and
Canada..
Taiwan's manufactured exports to LDCs have grown spectacularly, from only
$300 million in 1970 to $2.1 billion last year. The sales surge has been concentrated
mainly in OPEC and the Pacific Basin; exports to Latin America and Africa remain
small. Roughly one-fourth of Taiwan's LDC exports go to OPEC countries, where
Taiwanese firms are gaining a substantial share of the construction business. Saudi
Arabia, for example, purchases about $100 million annually in steel for construction
(reinforcement bars and girders) from Taiwan. Other sizable Third World customers
are in the Pacific Basin, partly reflecting the close ties of Taiwanese businessmen with
overseas Chinese. The clothing industry in the Crown Colony of Hong Kong, for
example, takes one-half of Taiwan's synthetic textile output. Taiwan has also been
active in selling whole plants to its Basin neighbors; an agreement to supply a steel-
rolling mill has just been inked with Indonesia.
Competitive Factors
Several factors lie behind Taiwan's ability to make such rapid industrial gains and
such striking inroads in foreign markets. The country possesses an industrious, strongly
motivated labor force. Secondly, the government has promoted rapid export growth,
particularly by encouraging the timely expansion of key export industries. Thirdly,
this favorable environment has led to large-scale investment by foreign firms in
modern production facilities.
Efficient Labor Force
Taiwan has an excellent labor base to attract foreign investment and foster
industrial growth. After the Communists came to power in Peking, a sizable number
of educated and industrious Chinese came to Taiwan from the mainland. Like other
overseas Chinese, the workers are energetic, well-disciplined, and highly motivated
toward material gains. Nearly one-half of the labor force has at least nine years of
formal education; the literacy rate for the adult population is 91 percent. One out of
five workers has an advanced vocational or college education.
* Taiwan's market share in EC countries decreases considerably when intra-EC trade is taken into account, dropping
from 1.2 percent to 0.5 percent for all manufactured goods exports. Taipei's share of footwear exports to West
Germany, for instance, drops from 12 percent to less than 4 percent when intra-EC trade is included.
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Furthermore, the labor force has not pushed for excessive wage gains and has
allowed Taipei to give investment priority over immediate consumer spending.
Nominal wages have risen at an average annual rate of 7 percent over the last seven
years while productivity growth in manufacturing has increased by about to percent a
year. As a result, unit labor costs have risen by only 10 percent since 1970. Strike
activity is nil and labor unions are practically unknown.
The government in Taipei has made the most of Taiwan's underlying economic
strengths. It generally allows wide freedom of action to industrial and commercial
enterprises while encouraging and subsidizing development and exports in certain
target areas.
Taipei's exchange rate policy has been geared to maintaining export competitive-
ness. Until recently, Taiwan has kept its currency firmly pegged to the US dollar.
Despite rapid improvement in domestic unit labor costs, the Taiwan dollar has
appreciated only 11 percent against the US dollar since 1970. Measured in US dollar
terms, Taiwan's hourly wages stood at only 65 cents last year-roughly on a
competitive par with Singapore and South Korea. Although the appreciation of the
yen and the resulting increase in the cost of imports from Japan (30 percent of total
imports) has boosted the domestic inflation rate by 2 percentage points this year,
Taiwan has accepted this inflation rather than further appreciating its dollar and
losing export competitiveness.
Selected Countries: Average Hourly Earnings in Manufacturing
Taiwan
South Korea
Singapore
Hong Kong
Japan
US
1970
......................
0.21
0.20
0.29
0.34
0.93
3.36
1971
......................
0.24
0.21
0.30
0.39
1.11
2.57
1972
......................
0.25
0.22
0.35
0.46
1.48
3.81
1973
......... .........
0.29
0.25
0.44
0.57
1.99
4.08
1974
......................
0.41
0.28
0.52
0.61
2.43
4.41
1975
......................
0.48
0.35
0.62
0.61
2.83
4.81
1976
......................
0.56
0.48
0.62
0.77
3.10
5.19
1977
......................
0.65
0.64
0.66
0.77
3.76
5.63
The government gives financial breaks and other aids to export-oriented firms. It
? Created tax- and duty-free export processing zones to encourage invest-
ment in the assembly of electronic products, garments, and plastic products
for export. Sixty percent of foreign investment funds have flowed into
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Taiwan's three processing zones; 10 percent of total exports originate in the
? Exempted from duties all raw materials imported for the manufacture of
export goods.
? Established an Exhort-Import Bank this month with an initial capitaliza-
lion of $2.6 billion.
? Allowed firms to deduct 2 percent of export profits from taxable income.
? Granted a 10-percent reduction in business taxes for manufacturing,
mining, and handicraft corporations that export more than one-half their
output; exempted exporters from stamp taxes.
? Provided low interest loans for raw materials imports destined for re-
export.
Taipei also plays an equity role in firms and industries judged important to the
c-iuntry's export growth, such as petrochemicals, steel, shipbuilding, and electronics.
I )wring the current slowdown in the world shipbuilding market, the government
hailed out the industry by pouring $200 million into a joint public-private shipyard
project and took over failing firms to form the publicly owned China Shipbuilding
t ;orporation. Taipei also funnels funds into research facilities such as the Electronics
l 1dustry Research Center to develop integrated circuits and the Industrial Technology
1=csearch Institute to develop precision machinery.
l^"oreign firms play a key role in export-oriented industries, accounting for about
:}0 percent of manufactured export earnings. Foreign direct investment in Taiwan
h,tals $1.5 billion, with an annual average inflow of $150 million. In the manufactur-
e ig sector, more than 18 percent of total output is produced by foreign-controlled
rms: the heaviest concentration is in the electronics, footwear, and auto parts
,irlustries. In the electronics industry, 18 of the 20 television receiver producers are
areign owned; US firms control about one-half of TV output. All major US and
uanese auto firms operate assembly or parts plants in Taiwan.
i,ooking Ahead
i'aipei is targeting a 20-percent rate of real export growth through 1982 and is
?king several steps to meet that goal. To keep the ball rolling on foreign investment in
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Taiwan: Selected Foreign Direct Investment
Automotive
General Motors ..........................................................
Ford ..... .... ......... . r.... ... ..........
Nissan .......... .......... ......... .........:......... ..
Honda _ .................. .........
Subaru ............. _...................... ,........... .......................
Goodyear .... ..._ .............. .............. .....~........... .............
Electronics
Zenith .... ........... ........................................... .........
Philips ........ .. ............. ................ ..........
Hitachi .......................... ............ ................ .......... ........
Sony ................................ .................. ..........................
RCA .............. .... 11 ......... :............ .......... ;.,.......
GTE ..........._ ...............................................................
Matsushita .................... ............................. ................
Olympic .............. ................... ...........
Tandy ......... ......... ......... ...........
Petrochemicals
Trucks, vans
Passenger cars
Trucks, truck chassis
Passenger cars
Vans, small trucks
Tires
TVs and components
Color TV picture tubes
TVs, stereos, radios
TVs, stereos, radios
TVs and components
Electronics
Electronics
TV receivers
Stereos
Amoco ............................................................ ............ Petrochemicals
Union Carbide .............................. ............. ..............
Processing
Nestle ................... ........_......................................... .... Food processing
Taiwan, the government recently put together a new package of incentives including
measures that (a) allow an additional one- to three-year grace period on taxes; (b)
exempt from taxes income used for investment in machinery and equipment; (c) allow
an annual repatriation of 15 percent of invested capital beginning two years after
startup of a facility (a liberal repatriation allowance for an LDC); and (d) permit
companies to fully remit profits and interest earnings.
To overcome possible labor shortages, Taipei is directing future growth toward
more capital-intensive industries. High on the list are automobiles and parts, whole
plants, farm machinery, chemical and petrochemical products, machine tools, and
advanced electronic goods. To foster growth in these industries, the government is
taking a variety of actions:
? 'Taiwan (which now plays host to auto assembly operations) is looking to
the expanded production of auto parts as the forerunner of a full-fledged
auto industry. The government is offering tax breaks and subsidies to attract
automotive investment.
? In petrochemicals, the government has built several naptha crackers to
produce resins and is subsidizing the cost of oil used as feeder stock in
petrochemical facilities. This subsidy gives Taiwanese industry a substantial
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leg up on Japanese competitors. In addition, the government has reorganized
the plastics industry to form the vertically integrated Formosa Plastics
Corporation and has placed a heavy tax on resins destined for domestic use.
? I n the electronics industry, Taipei uses the Electronics Industry Research
Center to promote development of integrated circuits and advanced elec-
tronics equipment.
? The government is also giving its blessing to the establishment of Taiwan's
first large trading company patterned after the Japanese model. The Pan
Overseas Corporation, which includes 40 local and overseas firms, opened
for business early this month. It will provide overseas outlets for member
firms and establish a global market information network. The organizers
hope to form tie-ins with large foreign department stores to provide ready
marketing outlets for member firms.
Notes
Chinese Population Passes One Billion
Recent statements from Peking suggest the leadership recognizes that China's
population has passed the one billion mark, lending support to the US Government's
population series for the PRC-which presents an estimate of 1,004 million for mid-
1978:
? Vice-Premier Ten Hsiao 'in
state that "China possesses
China: Estimated and Projected Population '
1.949
1950
1951
1952
1953
.1954
1955
1956
1957
1958
1959
1960
1961
537.9
547.4
558.1
569.9
582.6
596.0
610.2
625.1
640.2
655.2
669.7
683.1
694.6
1962 ......................
1963 _............... 1964 ..-............
....._...
1965 ............................
1966, ...... ............
........
1967 . _..... _ .................
--._ ..............
1968-__
1969.......
1970 ............................
1971 ............................
1972 ...........................
1973 ...........................
1974 ....
707.0
721.8
737.5
754.0
771.1
788.7
807.3
826.6
846.6
866.7
886.4
905.7
924.4
1975.. ..........
1976 .._.......... ......._...
1977 ..........................
1978 .......
........_......
1979 .........
.._...._......
1980
1981
1982
1983 ................
...._.....
1984
1985......._...._...._...
1990._ ........_....__...
2000- _ ................
__...
943.0
962.3
982.5
1,003.9
1,023.6
1,042.0
1,059.3
1,075.7
1,091.6
1,106.9
1,122.0
1,198.3
1,379.6
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nothing apart from one thousand million Chinese and natural resources that
have to be exploited." (By contrast, the Chinese press is continuing to use
rounded figures of 8 hundred million or 9 hundred million.)
? Another indication that the Chinese Government is, in fact, using a figure
of 1 billion came obliquely in a July 1978 speech by Hu Ch'iao-mu,
president of the Chinese Academy of Social Sciences. Hu stated that "the
average per capita grain distribution in 1977 only matched that of 1955."
Given Chinese claims for grain output and the estimated level of grain
imports, this statement implies that the population figure used in Hu's
calculations was in the neighborhood of 1 billion.
? A recent Peking Review article offered statistics on the number of primary
school-age children in China; these data are 4 percent above the comparable
figure in the US Government series that gives the billion total for mid-1978.
According to Tung Chih-wen, secretary of the Hunan Provincial Party Commit-
tee, speaking at a provincial meeting on planned parenthood this month, the national
10-year economic plan (1976-85), approved at the Fifth National People's Congress,
"stipulates that the nationwide natural population growth be reduced to nine per
thousand by 1985." This may be compared with Chairman Hua Kuo-feng's statement
at the same Congress last February that China should "strive to lower the annual rate
of growth ... to less than one percent within three years." Either goal is significantly
more optimistic than the current US Gover e rate of growth will
only decline to 13 per thousand by 1985.
Major :Developed Countries Show Mixed Third Quarter Trends
Based on data in the EIWR Indicators databank, the third quarter evidenced the
following trends for the seven largest industrial countries:
? Industrial production in the Big Six countries generally leveled off in the
quarter. Among individual countries, West Germany recorded a fairly strong
growth in its industrial sector; however, much of this growth was due to a
sharp upswing in July. Japan, Britain, and Canada posted slight increases in
output, France a slight decline, and Italy a substantial drop.
? Inflation heated up throughout the Big Six except in Canada where a slight
improvement in the high inflation rate occurred. Japan, after seeing its
inflation rate drop to under 1 percent (annual rate) in the first quarter,
experienced a near 8-percent rate in the third quarter. For the entire Big Six,
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Major Developed Countries: Recent Economic Trends'
1.977 1978
1st qtr 2nd qtr 3rd qtr 4th qtr 1st qtr 2nd qtr 3rd qtr
Index: 1970=100
Industrial Production
United States ............ 123.9 127.1 128.4 129.2 129.5 133.6 136.3
Big Six.... ... ........ - 124.0 122.3 121.6 122.5 124.5 125.7 126.0'
Japan .................... 129.1 128.9 128.7 130.1 134.0 136.4 137.3
West Germany ... 117.0 115.7 116.0 117.3 117.0 116.3 118.71
France .................. 128.3 125.3 125.3 123.7 126.3 127.7 127.3
United Kingdom .. 105.5 103.0 104.0 103.4 102.8 104.2 104.8'
Italy ...................... 131.9 125.5 115.9 120.4 125.3 126.1 118.7
Canada .................. 131.9 132.1 133.0 134.8 135.7 137.5 138.6
Consumer prices
United States ........... 8.3 8.7 5.3 4.4 7.9 10.7 9.1
Big Six- ...................... 10.4 9.9 8.1 5.6 4.6 7.2 8.9
Japan _..._ ............. 7.8 8.9 6.1 2.1 .5 6.1 7.6
West Germany .... 5.3 3.8 3.6 2.0 2.9 2.2 2.5
France ............. ..... 6.4 12.3 10.3 7.9 6.4 11.5 11.6
United Kingdom.. 21.1 12.4 11.6 7.7 6.4 5.2 12.2
Italy ..................... 20.8 16.4 14.5 11.5 11.1 12.4 13.5
Canada ..._ ............. 9.9 9.5 7.2 10.0 8.6 9.8 8.7
Unemployment
United States ............ 7,161.3 6,889.0 6,736.0 6,553.7 6,154.7 5,962.0 6,054.3
Big Six.. ..... . .............. 6,642.0 6,923.0 7,297.0 7,133.1 7,037.4 7,237.1 7,495.5
Japan .................... 1,026.7 1,116.7 1,150.0 1,133.3 1,156.7 1,266.7 1,276.7
West Germany ... 1,012.0 1,036.0 1,042.7 1,026.7 1,008.3 991.0 991.3
France .................. 996.8 1,069.2 1,148.7 1,073.0 1,054.7 1,141.4 1,251.0
United Kingdom 1,330.2 1,330.5 1,417.0 1,427.8 1,409.4 1,372.7 1,380.5
Italy .............. ...__. 1,450.0 1,518.7 1,660.7 1,572.0 1,498.3 1,522.7 1,(358.0','
Canada.. ........ - ...... 826.3 852.0 878.0 900.3 910.0 942.7 938.0
Balance of trade
United States ............ -23.0 -23.1 -25.7 -34.4 -38.7 -26.8 -25.2
Big Six.-- .................. 22.5 31.6 42.9 49.8 52.1 62.0 58.6
Japan .................... 15.6 16.4 17.5 19.1 29.5 27.5 26.7
West Germany .... 17.9 22.3 21.4 24.5 20.5 27.4 28.4
France .................. -4.4 -2.9 -2.1 0.4 -0.5 1.1 1.0
United Kingdom .. -6.6 -4.9 -0.2 0.3 -4.5 -1.0 -2.2
Italy ...................... -17 0.3 4.0 1.9 2.0 5.7 2.7
Canada .................. 2.6 0.4 2.2 3.1 5.2 1.3 2.0
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 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
Export Volume
United States ............ 147.3 149.0 152.6 145.5 145.8 162.8 167.45
Big Six ........................ 166.5 168.3 169.3 172.5 174.0 177.4 175.76
Japan .................... 224.9 220.9 223.1 218.0 239.4 211.9 210.0
West Germany .. 156.7 159.3 160.4 165.7 161.2 171.2 168.75
France .................. 165.8 166.4 170.3 177.0 177.6 178.6 183.3 ?
United Kingdom 137.2 145.0 148.9 141.1 143.0 144.9 147.6
Italy ...................... 156.0 164.1 158.1 174.0 154.4 179.4 165.85
Canada .................. 139.5 136.4 136.9 137.3 148.6 149.3 147.15
Index: 1970=100'
Import Volume
United States ............ 151.2 150.8 154.0 157.4 159.6 161.4 166.71
Big Six.. , ..................... 147.6 145.1 143.9 147.7 149.3 152.7 154.31
Japan .................... 156.6 152.6 156.2 157.8 157.5 159.2 166.3
West Germany .... 160.5 155.3 159.4 166.5 168.8 173.4 166,91
France .................. 167.6 163.1 167.0 169.1 171.9 173.3 179.60
United Kingdom .. 125.0 127.0 122.3 117.8 131.6 126.2 131.2
Italy ...................... 122.9 121.0 107.5 126.0 111.0 121.2 120.81
Canada .................. 164.1 167.1 159.3 153.3 157.0 172.1 167.81
Index: 1970=100 t
Export prices in
US dollars
United States ............ 189.2 192.2 191.1 192.4 198.4 204.5 211.12
Big Six ........................ 197.3 200.9 206.9 213.0 223.1 227.4 239.6 2
Japan .................... 179.9 185.3 189.9 200.9 206.2 232.6 246.4
West Germany .... 208.4 210.7 215.6 224.6 237.1 236.6 246.2 2
France .................. 206.5 208.4 215.4 218.9 227.7 236.7 249.0'
United Kingdom .. 196.1 201.3 208.6 222.8 240.0 234.4 252.3
Italy ...................... 200.8 206.4 214.4 212.8 223.4 225.0 238.82
Canada .................. 188.3 187.3 190.3 185.0 188.9 187.7 193.61
Export prices in
rnational currency
United States ............ 189.2 192.2 191.1 192.4 198.4 204.5 211.1 2
Big Six ........................ 186.3 188.3 191.5 191.8 193.7 196.7 197.71
Japan .................... 142.7 141.7 140.4 137.9 136.1 142.7 132.0
West Germany .... 136.4 135.9 135.9 136.5 134.5 134.3 135.1 2
France .................. 185.0 185.8 189.6 190.6 194.6 196.3 196.51
United Kingdom 274.7 281.1 288.6 294.7 298.6 306.9 313.6
Italy ...................... 283.4 292.6 302.8 299.0 308.3 310.2 318.81
Canada .................. 185.1 188.1 194.4 194.6 200.7 201.8 211.42
Based on series contained in EIWR Indicators; all series except export price series are seasonally adjusted.
Estimate for September.
? Not :seasonally adjusted.
Derived from trade value, national currency base trade price, and exchange rate series.
? Estimate for September value of price series.
? Estimate for third quarter value of price series.
Estimate for quarter.
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 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
I he third quarter composite inflation rate was 8.9 percent, compared with a
=t 6 percent first quarter rate.
? fnemployment continued to climb slightly in the Big Six, reaching a total
of T5 million persons, 0.9 million above the level recorded at the beginning
of 1977. On an individual country basis, all of the Big Six experienced
-orsened or unchanged unemployment except Canada and, even there,
most observers believe the slight improvement was a temporary
phenomenon.
? The combined trade surplus of the Big Six fell for the first time in eight
quarters, still remaining above a $58 billion annual rate. Japan's surplus
declined for the second quarter in a row, but the West German surplus, after
jumping sharply in the second quarter, rose again. Italy's surplus showed the
most marked decline.
? trade volume trends probably reflected a response to shifts in relative
competitiveness as a result of past exchange rate movements. Japan's export
volume, for example, declined for the second consecutive quarter, and the
overall average for the Big Six was down. In contrast, US export volume
posted its second consecutive quarter of strong growth. On the import side,
Ja )an's volume moved strongly upward as did Britain's. On the other hand,
West German import volume is estimated to have fallen from the second
quarter level.
? s,;xport price trends show that realignment of relative competitive positions
has occurred, especially for the United States vis-a-vis the other countries. A
comparison of the US export price index to the average of Big Six export
prices expressed in US dollars shows average Big Six dollar export prices
standing 14 percent above US export prices in the third quarter, with both
indexes based on 1970 = 100. In contrast, in second quarter 1976, the Big Six
index was less than 1 percent above the US index. Both Japan's and West
Gr'rmanys export prices in dollars were 17 percent above US export prices;
West German prices were only 4 percent higher in mid-1976 and Japanese
prices 7 percent lower. These marked swings in relative competitiveness
mainly reflect exchange rate movements; in national currency terms, US
prices have continued to climb faster than the Rig Six average.
25X1
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 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
East German Economy Aided by Accords With FRG
The new series of economic agreements between the two German states will boost
transfer payments to East Germany by 60 percent, substantially reducing the current
account deficit with West Germany and preventing cutbacks in sorely needed imports
from the Federal Republic. Beginning in 1980, these payments-which consist mainly
of transit fees and payments for construction services-should provide East Germany
with an annual hard currency inflow of about $400 million, equivalent to 18 percent
of hard currency imports from West Germany. Other direct West German payments
to the GDR should bring in at least another $200 million annually over the life of the
agreement.
During first half 1978, the East German trade deficit with the Federal Republic
totaled almost $200 million, largely because of a continued rise in imports in the face
of a leveling off in exports. The poor quality of East German products and increasing
GDR export commitments to CEMA trading partners have been holding back exports
to West Germany, heightening the importance of future West German transfer
payments in maintaining a reasonable balance in inter-German trade
II
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 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
Secret
Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
 ?819br Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
Assessment
Center
Economic Indicators
Weekly Review
ER EI 78-047
24 November 1978
Approved For Release 2005/07/12 : CIA-RDP80T00702AO01000010001-8
 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
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 tho-e 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
Approved For Release 2005/07/12 : CIA-RDP80T00702AO01000010001-8
 25X1 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
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 BIG SIX FC fffifd ? SQL' iY9?9 LwAYbRS
140
130
20 e="`
120,e--
INDEX: 1970=100, seasonally adjusted
INDEX:
Semilogarithmic Scale
Percent
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 Approy44r Release JQ . 7/12: CIA-q T00702A00110 10001-8 1978
llncluding Japan, West Germany, France, the United Kingdom, Italy, and Canada. A-2
 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
Consumer Price Inflation
Note: Three-month average compared with previous three months.
Trade Balance
4.0
Percent, seasonally adjusted, annual rate
Billion US $, f.o.b., seas) ally adjusted
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
AVERAGE ANNUAL
Percent Change GROWTH RATE SINCE
LATEST from Previous 1 Year 3 Months
MONTH Month 1970 Earlier Earlier2
Industrial
Production
Big Six AUG 78 -0.5 2.8 3.1 1.5
United States it 7R 0.6 5.9 6.4 9.7
Consumer Prices
Big Six
United States
SEP 78
P 78
0.3 9.2 6.3 8.8
0.8 6.8 8.3 9.1
3 Months
LATEST MONTH 1 Year Earlier Earlier
Unemployment Rate
Big Five SEP 78 4.5 4.4 4.5
Trade Balance
Big Six
United States
LATEST , MILLION CUMULATIVE (MILLION US $)
MONTH US,$ 1918 1917 Change
AUG 78 5,581 36,973 20,145 16,828
'110 7i' -1,621 -20,976 -16,050 -4.926
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2Average for latest 3 months compared with average for previous 3 months, seasonally adjusted at annual rate.
A-3
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INDUSTRIAL PRODUCTION INDEX: 1970=100, seasonally adjusted
1973 Average 120
130
West Germany
130
120
France
JAN APR JUL OCT R OC P JA P T 1 N APR JUL OCT
~pebved For f2ei6'asg ~10dt/0Y1i 2 biA-kDO"80Td0i6 Atrt~10600J~700 -8
1973 1974 1975 1976 1977 1978
A-4
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United Kingdom
130
120
10 115
j
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
GROWTH RATE SINCE
Change
from
GROWTH RATE SINCE
LATEST
from
Previous
1 Year
3 Months
LATEST
Previous
1 Year
3 Months
MONTH
Month
1970
Earlier
Earlierl
MONTH
Month
1970
Earlier
Earlierl
United States
OCT 78
0.5
3.9
6.8
7.8
' United Kingdom
AUG 78
0.9
0.6
1.2
5.0
Japan
SEP 78
0.6
4.0
6.8
2.6
Italy
SEP 78
6.8
2.4
1.9
-21.4
West Germany
AUG 78
-1.7
2.1
1.7
12.1 ..
'd Canada
AUG 78
-0.8
4.1
3.8
3.6
France
SEP 78
0.8
3.1 '..
1.6
-1.0
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lAverage for latest 3 months compared with average for previous 3 months.
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UNEMPLOYMENT RATE
United States
Japan
West Germany
fro
2
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
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 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
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
3
Canada
3.5
1975 1976 1977 1978
THOUSANDS OF PERSONS UNEMPLOYED
1 Year
Earlier
3 Months
Earlier
1 Year
Earlier
3 Months
Earlier
United States
oC T 78
5,810
6,688
6,193
United Kingdom
UCT 75
1,360
1,432
1,371
Japan
SEP 78
1,300
1,120
1,310
Italy
18 lit
1,658
1,692
1,455
West Germany
-.' 10
98b
1,035
986
Canada
.i''i' i'b
945
887
944
France
OCT 78
1,215
1,097
1,241
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.
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 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
CONSUMER PRICE INFLATION Percent, seasonally adjusted,
annual rate'
United States
Japan
2.9 Average Annual Rate of Inflation 1961-113.",
France
15
10
4C~
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
1973 1974 1975 1976 1977 1978
'Three-month average compared~gl{tj~crEYiodsthbf r~o lease 2005/07/12 : CIA-RDP80TOO702AO01000010001-8
HNF+f lJV U r A-8
 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
United Kingdom
35
30
25
20
15
Italy
35
30
25
20
15
15
10
APR JUL OCT
1974
APR JUL OCT JAN APR JUL OCT
1977 1978
Percent
Change
AVERAGE ANNUAL
GROWTH RATE SINCE
Percent
Change
f
AVERAGE ANNUAL
GROWTH RATE SINCE
LATEST
from
Previous
1970
1 Year
3 Months
LATEST
rom
Previous
1970
1 Year
3 Months
MONTH
Month
Earlier
Earlier2
MONTH
Month
Earlier
Earlier2
United States
SEP 78
0.8
6.8
8.3
9.1
United Kingdom
SEP 78
0.9
13.2
7.8
12.2
Japan
SEP 78
-0.2
9.7
3.7
7.6
Italy
OCT 78
0.9
13.1
12.3
11.8
West Germany
SEP 78
0
5.1
2.2
2.5
Canada
SEP 78
0.1
7.6
8.6
8.7
France
SEP 78
0.5
9.1
9.2
11.6
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A-9
 p7 pove d For Release 2005101
-RDP
RETAIL
8OTOO7-0-2AOOiOOOO4OO04-
SALES
8 --
Average
Average
Annual Growth Rate Since
Annual Growth Rate Since
Percen
from
Quarter Q
t Charge
Previous
uarter 1970
1 Year Previous
Earlier Quarter
Latest
Month
Percent Change -.----- _-- _
from Previous i Year 3 Months
Month 1970 Earlier Earlier'
United S
tates
Sep 78
0
8
3
5
4
9
United States
78 111
3.2
3.8
.
.
.
Japan
Jun 78
1
3
9
3
5
8
Japan
78 II
5.4
5,3
.
.
.
West G
ermany
Aug 78
0
2
7
2
5
West Germany
78 II
2.7
1 4.2
France
Jan 78
.
.
France
78 I
4.1
1.4
United K
ingdom
Oct 78
United Kingdom
78 1
1.8
2.3
Italy
Jul 78
Italy
78 1
2.0
2.8
i -0.8
Canada
Canada
78 II
1.1
4.7
3.7
' Seasonally adjusted.
FIXED INVESTMENT
latest
Quarter
United States 78 III
Japan 78 II
West Germany 78 II
France
United Kingdom
Italy
Canada
' Seasonally adjusted.
77 IV
78 1
78 I
78 11
Average
Annual Growth Rate Since
Percent Change - ___
from Previous 1 Year Previous
Quarter 1970 Earlier Quarter
6.5 I 6.1
' Seasonally adjusted.
' Average far latest 3 months compared with average for previous 3 months.
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Average
Annual Growth Rate Since
-____._.--.__..
Percent Change
Latest from Previous 1 Year 3 Months
Period Period 1970 Earlier Earlier '
Jul 78
Jun 78
78 II
77 IV
Jun 78
Aug 78
Aug 78
' Hourly earnings (seasonally adjusted) for the United states, Japan, end Canada, hourly wage
rates far others. West German and French data refer to the beginning of the quarter.
'Average For latest 3 months canpared with that for previous 3 months.
Latest Date
1 Year 3 Months I Month
Earlier Earlier Earlier
United States
Com
mercial p
aper
Nov 1
9.33
6.55
1 7.78
8.64
Japan
West Germany
France
Coll
Inte
Call
money
rbank loa
money
ns (3 mon
ths)
Nov 3
Nov 1
Nov 3
7.00
8.75
United Kingdom
Ster
ling inter
bank loon
s (3 months)
Nov 1
11.08
4.84
Canada
Fina
nce pape
r
Nov 1
9.98
7.38
Eurodollars
Thre
e-month
deposits
I
Nov 1
10.98
7.14 I
8.28 I 9.58
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 EXPORT PRIC110proved For Release 2005/07/12 :
Cl 8 f1@ ff 02AO01 000010001 -8
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
Aug 78
1.3
9.7 11.0
19.5
United States Aug 78 1.3
9.7 11.0
19.5
Japan
Sep 78
-1.0
11.7 31.3
12.8
Japan Sep 78 -0.2
3.3 -6.6
-- 30.5
West Germany
Aug 78
1.7
11.7 14.3
23.3
West Germany Aug 78 -1.2
3.7 -1.5
-0.3
France
Jun 78
2.2
11.5 13.6
7.8
France Jun 78 0.6
8.8 5.3
-2.8
United Kingdom
Oct 78
2.8
12.5 22.2
36.3
United Kingdom Oct 78 0.3
14.9 7.7
8.2
Italy
Aug 78
2.6
11.4 10.9
28.2
Italy Aug 78 2.6
15.4 5.2
9.5
Canada
Aug 78
4.1
8.7 1.4
19.2
Canada Aug 78 5.6
9.8 7.6
28.7
IMPORT PRICES
OFFICIAL RESERVES
National Currency
Average
Billion US
$
Annual Growth Rate Since
Latest Month
Percent Change
1 Year
3 Months
Latest from Previous
1 Year
3 Months
End of Billion US $
Jun 1970 Earlier
Earlier
Month
Month
1970 Earlier
Earlier
United States Sep 78 18.8
14.5 19.0
18.9
United States
Aug 78
0.6
12.7 7.9
3.3
Japan Aug 78 29.2
4.1 17.8
27.7
Japan
Sep 78
-0.4
5.0 -23.7
-37.8
West Germany Sep 78 44.7
8.8 34.5
40.7
West Germany
Aug 78
0.4
3.4 -3.4
7.6
France Apr 78 10.6
4.4 10.0
10.2
France
Jun 78
-0.6
9.1 0.2
-9.1
United Kingdom Sep 78 17.6
2.8 17.3
17.3
United Kingdom
Oct 78
0.5
17.0 4.1
5.2
Italy Sep 78 14.1
4.7 10.5
13.2
Italy
Aug 78
0.8
18.4 1.8
1.3
Canada Oct 78 5.1
9.1 4.2
4.6
Canada
Aug 78
1.7
9.8 10.0
16.1
CURRENT ACCOUNT BALANCE '
BASIC BALANCE '
Current and Long-Term Capital Transactions
Cumulative (Million
US $)
Cumulative (Million
US $)
Latest
Period Million US $
1978 1977
Change
Latest
Period Million US $
1978 1977
Change
United States 2
78 I -6,954 -
6,954 -4,158
-2,796
United States No longer published 2
Japan
Sep 78
1,900 1
3,982 6,442
7,540
Japan Sep 78 600
6,746 4,390
2,356
West Germany
Aug 78
10
2,725 788
1,937
West Germany Aug 78 -75
1,730 -3,308
5,038
France
78 I
-84
-84 -1,628
1,543
France 78 I -863
-863 -1,889
1,025
United Kingdom
78 I
-803
-803 -896
94
United Kingdom 78 I -326
-326 543
-869
Italy
78 I
288
288 - 1,025
1,313
Italy 77 III 2,427
N.A. N.A.
N.A.
Canada
78, II -1,201 -
2,381 -2,658
277
Canada 78 II 883
327 -557
884
' Converted to US dollars at the current market rates of exchange.
'Converted to US dollars at the current market rates of exchange.
As recommended by the Advisory Committee on the Presentation of Balance
of Payments
'Seasonally adjusted.
Statistics, the Department of Commerce no longer publishes a basic balance
.
TRADE-WEIGHTED EXCHANGE
RATES'
EXCHANGE RATES
Spot Rate
As of 3 Nov 78
Percent Change from
Perce
nt Change from
As of 3 Nov 78
US $
1 Yeor 3 Months
1 Year
3 Months
Per Unit
19 Mar 73
Earlier Earlier
27 Oct 78
19 Mar 73 Earlier
Earlier 27
Oct 78
Japan (yen)
0.0054
40.77
34.60 0.49
-3.45
United States -4.05 -9.14
0.02
2.86
West Germany
0.5283
48.61
19.49 3.91
-7.03
Japan 43.76 30.37
0.27 -1.94
(Deutsche mark)
West Germany 33.93 5.26
1.87 -2.25
France (franc)
0.2326
4.80
12.56 -0.02
-5.70
France -10.41 -2.23
-2.65 -0.36
United Kingdom
1.9820
-19.83
11.54 0.92
-3.93
United Kingdom -29.09 -0.25
-0.85
0.34
(pound sterling)
Italy -43.72 -7.95
-2.21
0.57
Italy (lira)
0.0012
-31.95
5.36 -0.17
-4.62
Canada -16.38 -8.75
-3.07
1.52
Canada (dollar)
0.8558
-14.70
-5.36 - 2.77
0.50
Wei hting is based on each listed c
ounty s
tr
a
de
w
i
t
h
1
6 other industrialized countries to
Approved For Release 2005/07/12:
A
/ ~
/
-
/
.-
(
- /
-
IAreRD1 8 G107rp,2AfWF$bbOO1sWQ$.8g the major currencies.
 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
UNITED STATES
1975 ..........................
1976 ..........................
1977 .........................
1978
1st Qtr ................
2d Qtr ................
Jul_ .......................
Aug ........................
JAPAN
1975 ..........................
1976 .... _ ....................
1977 ..........................
1978
1st Qtr ................
2d Qtr ................
Jul- ........................
Aug ........................
WEST GERMANY
1975 ..........................
1976__ ......................
1977 ..........................
1978
1st Qtr
Jul- ........................
Aug .......................
FRANCE
1975 ..........................
1976 ..........................
1977 ..........................
1978
1st Qtr ................
2d Qtr ................
Jul ..........................
Aug... .....................
UNITED KINGDOM
Exports to (f.o.b.)
Big Other Com-
World Seven OECD OPEC munist Other
107.59 46.93 16.25 10.77 3.37 30.27
115.01 51.30 17.67 12.57 3.64 29.82
120.17 53.92 18.54 14.02 2.72 30.97
30.96 13.65 4.60 3.76 1.00 7.95
37.05 16.14 5.25 4.43 1.44 9.79
10.94 4.51 1.51 1.38 0.40 3.14
11.61 4.95 1.65 1.32 0.37 3.33
55.73 16.56 6.07 8.42 5.17 19.52
67.32 22.61 8.59 9.27 4.94 21.91
81.12 28.03 9.72 12.03 5.33 26.01
22.11 7.79 2.43 3.35 1.32 7.22
24.07 8.60 2.44 3.55 1.74 7.74
8.58 2.99 1.02 1.33 0.51 2.73
8.18 2.94 0.86 1.19 0.58 2.60
90.11 28.33 36.44 6.78 7.21 11.33
101.93 33.44 41.86 8.25 7.02 11.36
118.01 39.00 48.01 10.78 7.30 12.92
32.45 11.17 13.05 2.76 1.97 3.49
34.69 11.94 13.71 3.01 2.26 3.77
10.42 3.64 3.93 1.01 0.65 1.18
10.99 3.38 4.57 1.01 0.71 1.32
53.03 20.01 15.50 4.90 3.13 9.50
57.05 22.49 16.15 5.08 3.23 10.10
64.86 25.90 18.18 5.96 2.99 11.82
18.49 7.66 5.07 1.57 0.66 3.53
20.36 8.31 5.60 1.70 0.84 3.91
6.66 2.78 1.72 0.59 0.27 1.29
4.86 1.92 1.25 0.46 0.24 1.00
1975 .......................... 44.46 12.54 16.59 4.55 1.56 9.21
1976 .. ....................... 46.56 14.03 17.53 5.13 1.39 8.48
1977.._ ..................... 58.04 17.29 22.20 6.77 1.63 10.14
1978
1st Qtr ................
2d Qtr ................
Jul ..........................
Aug ........................
ITALY
1975 ..........................
1976. .................. ......
1977 ..........................
1978
1st Qtr ................
2d Qtr ................
Jul.- .......................
CANADA
1975 ..........................
1976.. _ ........... ......
1977 ..........................
1978
16.86 5.09 6.27 2.03 0.55 2.92
17.60 5.38 6.59 2.20 0.51 2.92
5.80 1.84 2.10 0.71 0.16 1.00
5.77 1.73 2.18 0.69 0.15 1.02
34.84 15.61 7.86 3.72 2.46 5.19
37.25 17.58 8.73 4.27 2.18 4.48
45.04 20.91 10.20 5.84 2.46 5.64
10.80 5.22 2.40 1.37 0.48 1.33
13.65 6.51 2.92 1.81 0.66 1.75
4.46 2.17 0.93 0.57 0.22 0.57
34.07 26.30 1.72 0.71 1.20 4.14
40.52 32.01 2.03 0.81 1.25 4.40
43.08 34.83 2.20 1.17 1.08 3.80
1st Qtr ................ 10.87 8.88 0.45
2d Qtr ................ 12.66 10.32 0.56
0.23 0.22 1.10
0.23 0.36 1.19
0.15 0.36
Source: International Monetary Fund, Direction of Trade.
A-12
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 Approved For Release 2005/07/12 : CIA-RDP80TOO702AO01000010001-8
Big Other Com-
World Seven OECD OPEC munist Other
UNITED STATES
1975 .......................... 103.42 49.81 8.83 18.70 0.98 25.09
1976 .......................... 129.57 60.39 9.75 27.17 1.16 31.10
1977 .......................... 156.71 70.48 11.09 35.45 1.23 38.47
1978
1st Qtr ................ 43.14 20.39 3.51 8.15 0.47 10.62
2d Qtr ................ 45.99 22.53 3.68 7.90 0.48 11.40
Jul .......................... 15.67 7.56 1.29 2.62 0.14 4.04
Aug ........................ 14.96 6.92 1.11 2.91 0.19 3.83
JAPAN
1975 .......................... 57.85 16.93 6.08 19.40 3.36 12.07
1976 .......................... 64.89 17.58 7.78 21.88 2.91 14.73
1977 .......................... 71.32 18.88 7.92 24.33 3.41 16.79
1978
1st Qtr ................ 18.32 5.04 2.06 6.46 0.86 3.89
2d Qtr ................ 19.39 5.51 2.30 5.95 1.01 4.63
Jul .......................... 6.47 1.95 0.80 1.82 0.30 1.60
Aug ........................ 6.92 2.17 0.81 1.92 0.32 1.70
WEST GERMANY
1975 .......................... 74.92 27.09 27.78 8.24 3.51 8.30
1976 .......................... 88.14 31.28 32.64 9.73 4.38 10.11
1977 .......................... 101.42 36.39 37.37 10.12 4.92 12.61
1978
1st Qtr ................ 28.24 10.11 10.88 2.32 1.39 3.55
2d Qtr ................ 29.75 11.10 11.43 2.24 1.40 3.58
Jul .......................... 9.57 3.60 3.48 0.77 0.54 1.18
Aug ........................ 9.43 3.41 3.51 0.82 0.50 1.19
FRANCE
1975 .......................... 53.99 23.04 14.33 9.43 1.94 5.24
1976 .......................... 64.38 27.81 16.93 11.36 2.24 6.04
1977 .......................... 70.49 30.28 18.24 11.81 2.46 7.69
1978
1st Qtr ................ 19.76 8.58 5.40 3.05 0.64 2.09
2d Qtr ................ 20.42 9.16 5.62 2.77 0.68 2.19
Jul .......................... 6.31 2.88 1.65 0.94 0.23 0.61
Aug ........................ 5.56 2.49 1.29 0.95 0.21 0.63
UNITED KINGDOM
1975 .......................... 53.93 18.47 18.52 6.91 1.68 8.36
1976 .......................... 56.20 19.65 18.81 7.29 2.08 8.36
1977 .......................... 64.06 24.03 21.38 6.32 2.42 9.91
1978
1st Qtr ................ 18.87 7.44 6.68 1.80 0.55 2.40
2d Qtr ................ 19.31 7.66 7.27 1.30 0.59 2.48
Jul .......................... 6.42 2.58 2.17 0.58 0.21 0.88
Aug ........................ 6.30 2.48 2.08 0.60 0.23 0.91
ITALY
1975 .......................... 38.39 17.32 6.75 7.85 2.09 4.39
1976 .......................... 43.43 19.35 8.05 8.12 2.65 5.26
1977 .......................... 47.57 20.80 8.66 9.03 2.80 6.28
1978
1st Qtr ................ 11.26 5.03 2.10 2.18 0.51 1.44
2d Qtr ................ 13.38 6.14 2.58 2.15 0.73 1.76
Jul .......................... 4.90 2.18 0.93 0.82 0.37 0.61
CANADA
1975 .......................... 38.67 29.78 1.70 3.43 0.32 3.43
1976 .......................... 43.04 33.55 1.82 3.48 0.38 3.81
1977 .......................... 44.91 35.75 1.79 3.06 0.34 3.98
1978
1st Qtr ................ 10.80 8.60 0.44 0.77 0.08 0.91
2d Qtr ................ 13.52 11.08 0.50 0.71 0.09 1.13
Jul .......................... 3.88 3.05 0.17 0.26 0.04 0.35
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 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
FOREIGN TRADE BILLION US $, f.o.b., seasonally adjusted
United States
14.0
12.0
10.0
Imports
8.0
EJt 1)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
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A-14
 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
United Kingdom
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
1976 1977 1978
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
CUMULATIVE (MILLION US $)
CUMULATIVE (MILLION US $)
LATEST
MONTH
MILLION
US $ 1978
1977
CHANGE
LATEST
MONTH
MILLION
US $ 1978
1977
CHANGE
United States
SEP 78
13,429
104,054
91,352
13.9%
United Kingdom
OCT 78
264
56,265
46,177
21.8%
15,120
126.721
109.305
15.9%
6,025
57,957
49,019
18.2%
Balance
-1,691
-22,667
-17,953
-4,714
Balance
239
-1,692
-2,842
1,149
Japan
SEP 78
8,618
71,117
58,515
21.5%
Italy
SEP 78
4,509
37,843
32,756
15.5%
6,216
50,210
46,130
8.8%
4,005
35,250
32.347
9.0%
Balance
2,402
20,907
12,385
8,522
Balance
504
2,593
409
2,184
West Germany
AUG 78
11,974
90,233
76,223
18.4%
Canada
AUG 78
',640
29,739
27,962
6.4%
9,258
74,131
62,846
18.0%
3,478
28.071
26.672
5.2%
Balance
2,715
16,102
13,378
2,725
Balance
162
1,668
1,289
379
France
SEP 78
7,075
57,929
47,645
21.6%
-6,776
5354-1-
49,999-
Balance
299
417
-2,354
2,771
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A- 15
 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
FOREIGN TRADE PRICES IN US $1
United States INDEX: JAN 1975 =100
West Germany
JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT JAN APR JUL OCT
moved For RRIgr 2005/07/1 a ? ?-RDP80T00170 +0010000100 4- 8
lExport and import plots are based on five-month weighted moving averages.
A-16
 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
Canada
197J lpproved FoiLRA ase 2005/0-A/'X27:QIA-RDP80$(QJY0T2A0010000' ''98
57807 11-78
A-17
 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
SELECTED DEVELOPING COUNTRIES
MONEY SUPPLY'
INDUSTRIAL PRODUCTION '
Average
Average
Annual
Growth Rate Since
Annual Growth Rate Since
Percent Change -.
--_._._.
_..
Percent Change
_____-______
_
Latest
from Previous
I Year
3 Months
Latest
from Previous
I Year
3 Months
Month
Month
i
1970
Earlier
Earlier
Period
Period 1970
Earlier
Earlier'
Brazil
Mar 78
2.7
36.4
43.3
34.7
India
Jun 78
- 1.8 5.1
5.4
18.2
India
Apr 78
2.5
14.0
16.2
13.0
South Korea
Jul 78
-2.0 22.0
! 20.2
23.2
Iran
Jul 78
1.8
28.5
28.9
20.7
Mexico
Jun 78 ;
0 6.2
8.5
27.7
South Korea
Aug 78
5.8
31.3
30.9
26.2
Nigeria
78 I
6.8 11.4
0.5
30.0
Mexico
Jul 78
1.9
21.0
37.3
36.4
Taiwan
Aug 78 11
3.0 16.3
31.0
42.1
Nigeria
Mar 78
5.6
35.3
18.9
3.3
Taiwan
May 78
0.6
25.1
32.8
40
8
Seasonally adjusted.
.
'Average for latest 3 months compared with average for previous 3 months.
Thailand
Apr 78
-3.2
I
13.3
12.5
32.3
' Seasonally adjusted
.
' Average for latest
3 months compared with average for previous 3 months.
CONSUMER
PRICES
WHOLESALE
PRICES
Average
A
nnual Growth
Rate Since
Average
Percent Change --
-- ------
Annual Growth
Rate Since
Latest
from Previous
I Year
Percent Change - -
- -
-
Month
Month
1970
Earlier
Latest
from Previous
1 Year
Month
Month
1970
Earlier
Brazil
Jun 78
4.1
28.3
38.0
India
Jun 78
1.2
7.5
2.2
Brazil
may 78
3.4
28.4
34.5
Iran
Aug 78
-0.4
11.8
7.8
India
May 78
0.6
8.0
-2.8
South Korea
1 Sep 78
2.2
14.6
15.6
Iran
Aug 78
- 1.3
10.0
7.8
Mexico
Aug 78
1.0
15.1
17.0
South Korea
Sep 78
2.0
15.8
12.3
Nigeria
Dec 77
3.1
16.6
31.3
Mexico
Aug 78
-0.2
16.3
13.8
Taiwan
Aug 78
1.9
9.8
-0.6
Taiwan
Aug 78
0.4
8.1
1.6
Thailand
Jun 78
0.9
8.7
8.4
Thailand
Mar 78
-0.1
9.4
5.8
EXPORT PRICES
OFFICIAL RESERVES
US $
Average
Million US $
Annual Growth Rate Since
Latest Month
-- -- -
--- ----
- --- -
Percent Change
1 Year
3 Months
Latest
from Previous
1 Year
End of
Million US $ J
un 1970
Earlier
Earlier
Month
Month
1970
Earlier
Brazil
Feb 78
6,733
1,013
5,878
5,994
Brazil
Feb 78
0.4
14.0
1.5
India
Jun 78
6,140
1,006
4,559
5,823
India
Sep 77
-2.7
10.0
18.4
Iran
Sep 78
11,659 1
208
11,463
12,068
South Korea
78 II
2.4
8.8
8.9
South Korea
Aug 78
4,354
602
3,765
4,101
Taiwan
Jun 78
1.9
11.3
3.3
Mexico
Mar 78
1,766
695
1,422
1,723
Thailand
Dec 77
0.1
10.2 I
-7.8
Nigeria
Aug 78
1,872
148
4,611
2,609
Taiwan
Jun 78
1,462
531
1,411
1,433
Thailand
Sep 78 1
2,269
978
1,925
2,161
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 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
Latest 3 Months
Percent Change from
-- Cumulative (Million US $)
3 Months 1 Year --- --"
Latest Period Earlier' Earlier 1978 1977 Change
May 78 Exports
84.8
-3.7
4,743
4,979
-4.7%
May 78 Imports
26.6
1.4
5,110
4,939
3.5%
May 78 Balance
-367
40
-407
Mar 78 Exports
- 19.6
-13.5
1,476
1,707
- 13.5%
Mar 78 Imports
-24.1
9.7
1,444
1,316
9.7%
Mar 78 Balance
32
391
-358
Iran
Aug 78 Exports
2.9
10.4
15,868
15,635
1.5%
May 78 Imports
-1.6
1.6
5,705
5,259
8.5%
May 78 Balance
4,087
4,871
-783
South Korea
Jul 78 Exports
39.3
23.5
6,749
5,351
26.1%
Jul 78 Imports
83.0
29.2
7,284
5,695
27.9%
Jul 78 Balance
-535
-344
-191
Mexico
Jul 78 Exports
78.8
29.8
2,867
2,453
16.9%
Jul 78 Imports
225.3
41.9
3,596
2,751
30.7%
Jun 78 Balance
-728
-298
-430
Nigeria
78 II Exports
86.7
-26.0
1,808
2,526
-28.4%
78 I Imports
579.5
115.0
1,808
841
115.0?/0
78 I Balance
-974
368
- 1,342
Taiwan
Aug 78 Exports
84.2
38.7
8,044
5,884
36.7%
Aug 78 Imports
68.9
32.5
6,439
5,119
25.8%
Aug 78 Balance
1,605
765
840
Thailand
Jul 78 Exports
7.1
10.4
2,246
2,099
7.0%
Jul 78 Imports
51.5
13.8
2,697
2,330
15.7%
Jul 78 Balance
-450
-231
-219
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 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
AGRICULTURAL PRICES MONTHLY AVERAGE CASH PRICE
1-15 NOV II
1974 1975 1976 1977 1978 0 0
No. 2 Medium Grain, 4% Brokens,
f.o.b. mills, Houston, Texas
1-6 NOV II
CORN
5 $ PER BUSHEL
1-15 NOVJJ
1974 1975 1976 1977 1978
SUGAR
C PER POUND
15 NOV 0.6501
9 NOV 0.6655
OCT 78 0.6523
NOV 77 0.4904
COFFEE
2,000 Other Wilds Arabicas, ex-dock New York
aa.,v...l.:
0
1974 1975 1976 1977 1978
COFFEE/TEA
$ PER METRIC TON 400 c PER POUND
1-15 NOV f
15 NOV 149.33
9 NOV 150.67
OCT 18 153.60
NOV 77 196.44
TEA
London Auction
6,000
1976 1977 1978
15 NOV 7.94
9 NOV 7.98
OCT 78 9.02
NOV 77 6.66
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A-20
 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
SOYBEANS
S PER BUSHEL
10
15 NOV . 6.42
9 NOV 6.50
OCT 78 6.76
NOV 77 5.78
SOYBEAN MEAL
$ PER TON
500 400
1-15 NOV II
1976 1977 1978
SOYBEAN OIL/PALM OIL
$ PER POUND $ PER METRIC TON
0.51
SOYBEAN OIL
Crude, Tank Cars, f.o.b. Decatur
0.4
Crude, Bulk, c.i.f. US Ports
15 NOV 0.3050
9 NOV 0.3050
OCT 78 0.3045
NOV 77 0.2045
AUSTRALIA
Boneless Beef,
f.o.b., New York
2 NOV 105.00
26 OCT 103.00
OCT 78 107.40
NOV 77 ' 67.23
40
1974 1975
15 NOV 0.2350
9 NOV 0.2515
OCT 78 0.2718
NOV 77 0.2099
200'
9 NOV 171.50
OCT 78 176.26
NOV 77 163.40
1-15 NOV 1-7 NOV II
0 100
1976 1977 1978 1974 1975 1976 1977 1978
577801 11-78
$ PER METRIC TON
UNITED STATES
Wholesale Steer Beef, 2,500
Midwest Markets 105.0
1-2 NOV
11 NOV .81.50
4 NOV 79.50
SEP 78 81.64
NOV 77 65.47
1-11 NOV II 1,000
19781.1
FOOD INDEX
500
1970=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.
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 Approved For Release 2005/07/12 : CIA-RDP80T00702A001000010001-8
INDUSTRIAL MATERIALS PRICES MONTHLY AVERAGE CASH PRICE
COPPER WIRE BAR
140 C PER POUND
13 NOV 80.5
9 NOV 80.5
OCT 78 74 3
NOV 77 490
0 1-13 NOV I) 0
1974 1975 1976 1977 1978
LME US
15 NOV 65.2 73.6
9 NOV 66.7 73 6
OCT 78 68.4 71.4
NOV 77 53.6 60.6
11 PER METRIC TON LEAD
45 C PER POUND
1-15 NOV (I 1,000
1976 1977 1978 10
LME `y
15 NOV 679.2 746.1
9 NOV 695.8 762-3
OCT 78 700.9 748.9
NOV 77 572.6 621.1
PLATINUM
$ PER METRIC TON $ PER TROY OUNCE
150 350
MP l1S1)
15 NOV 329.0 288.0
8 NOV 361.5 280.0
OCT 78 262.9 3278
NOV 77 167.2 169.4
1-15 NOV
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A-22
 Approved For Release 2005/07/12 : CIA-RDP80TOO702AO01000010001-8
ALUMINUM
US STEEL
IRON ORE
CHROME ORE
CHROME ORE
FERROCHROME
NICKEL
MANGANESE ORE
TUNGSTEN ORE
MERCURY
SILVER
Major US Producer
E per pound
55.25
53.00
53.00
48.00
Composite
$ per long ton
419.31
395.81
359.36
327.00
Non-Bessemer Old Range
$ per long ton
22.55
21.43
21.43
20.51
Russian, Metallurgical Grade
$ per metric ton
NA
NA
150.00
150.00
S. Africa, Chemical Grade
$ per long ton
56.00
56.00
58.50
42.00
US Producer, 66-70 Percent
E per pound
42.00
42.00
41.00
43.00
Composite US Producer
$ per pound
2.02
2.06
2.07
2.41
48 Percent Mn
$ per long ton
67.20
67.20
72.24
72.00
Contained Metal
$ per metric ton
18,474.00
17,169.00
22,113.00
18,082.00
New York
$ per 76 pound flask
153.00
150.55
138.43
134.50
LME Cash
f per troy ounce
581.58
514.64
482.70
436.90
London Afternoon Fixing Price
$ per troy ounce
213.02
176.31
162.10
130.44
LUMBER INDEX6
1-15 NOV
1-7 NOV II
1978
1-10 NOV
1978
lApprocimates 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.
Approved For Release 2005/07/12 : ~I- RDP8OTOO7O2AOO1OOOO1OOO1-8