ECONOMIC INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500140008-9
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 13
• Document Creation Date: December 20, 2016
• Document Release Date: March 20, 2006
• Sequence Number: 8
• Publication Date: April 5, 1973
• Content Type: REPORT

 A~roved
~. ~
or Release 2006/04/119: CC A- 85~T00875RQfY150014~II8-9
Secret
.Economic intelligence I~eekl~
Secret
CIA No. 7386/73
5 April 1973
Copy No. 4
Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
 25X1 gpproved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
 Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET
CONTENTS
Page
Debate over CAP Price Proposals for 1973-74
Japan's Gold Imports to Rise Steeply
1
unrsra ay ee More US Wheat
2
US May Be Excluded from Mexico's Tractor Market
2
Moscow May Make Sales Pitch iri the United States
2
Abu Dhabi Investigates Alternatives to Dollar Holdings
3
Agricultural Developments in Eastern Europe Prospects for the 1973
winter grain harvest are mediocre, attd grain imports may have to be
increased next year.
Soviets Interested in Still More Grain?New shipping charters will give
the USSR the capability to move sttbstarttial qua~ttitier of grant it:
FYs 1974 and 1975.
Brazil's Soybean Potential: An Emerging Threat to US Exports The
United States still dotni~tates the soybean market, but Bra: il's otctput
and exports have been skyrocketing.
East Asia Export Boom Planned to Continue The US trade deficit
with Taiwan, South Korea, attd Hong Kong is likely to increase
unless recent trends a; a altered.
Publications of Interest
Sumr;aries of Recent Publications 9
Note: Comments and ueries on the Conte n are welcomed. They may be directed
to
i
Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET 5 April 1973
 Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET
Debate over CAP Price Proposals for 1973-74
Bonn's Nlinister for Agriculture Ertl wants larger grain price increases
and labels as premature the Commission's proposal to limit all increases
in Germa~iy in an effort to reunify EC agricultural prices. French, Belgian,
and Irish officials also are insisting on larger price increases for some
products, while British and Italian officials want agricultural prices frozen.
Britain's Minister of Agriculture Godb~r has even hinted that the United
Kingdom might use a veto to block price increases. The agricultural ministers
will meet to discuss the Commission's re endations at the EC Council
meetin s scheduled to start on 9 A ril.
Japan's Gold Imports to Rise Steeply
Private Japanese interests are importing gold for the first time since
World War II, following the government's 1 April liberalization of gold
import regulations. As a result, imports this year are expected to reach
130-I50 tons, rou hl double the 1972 level.
The new measures, designed to meet
industrial needs, also permit individuals to import the equivalent of X3,000
in gold at any one time without government approval. Japanese department
stores already are selling small gold bars. The international gold markets
alread~t have discounted the Japanese move. Rumors of the change in import
laws contributed to the substantial rise in the international old rice earlier
this year.
SECRET 5 April 1973
Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
 Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET
Tunisia May Seek More US Wheat
Heavy flooding in Tunisia's most fertile agricultural area may prompt
requests for increased PL-480 wheat shipments in FY 1974. (PL-480
commitments in FY 1973 amount to 10,000 tons.) Preliminary assessment
of crop damage indicates that at least 20% of this year's cereal crop is
lost. Such losses could double wheat import requirements in FY 1974 to
more than 450,000 tons. Tunisia almost certainly would seek any additional
wheat from its traditional su liers, the United States France an C
U5 May Be Excladed from Mexico's Tractor Market
Mexico is offering exclusive access to its track-type tractoi market to
a foreign firm willing to set up a new plant to manufacture o~~e small model
in Mexico domestically. Caterpillar Tractor, presently holding 50% of the
market, apparently is out of the running because o-? unwilling;ness to accept
managerial control by Mexicans. A Japanese firm ~ now is the leading
candidate over two other US firms. If the Japanese firm wins, the exclusive
access clause will close the door on US exports amounting to some
$20 million next year. However, a com romise solution involvin a Ja a e
firm and a US firm is possible. 25X1
Moscow May Make Sales Pitch in the United States
The USSR apparently is laying the groundwork for a major sales effort
in the United States while awaiting Congessional approval for MFN. Moscow
has requested a US advertising firm to study market conditions for the
possible sale of Soviet machine tools, welding equipment, textile machinery,
hydrofoils. and YAK-40 transports. The firm also will act as an adviser
for contracting out additional studies to other US advertising agencies and
will prepare formats for tl?~ree Soviet marketing publications promoting
US-Soviet trade. January 1974 is the target completion date for tl a stu ie
and for initial publication of the Soviet periodicals. 25X1
Approved For Release 2006/04/19~~(P},~~5T00875R001500$18}~73
 Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET
Abu Dhabi Investigates Alternatives to Dollar Holdings
The government is *e-evaluating its use of dollars for foreign
commercial transactions in light of the recent dollar devaluation n
The small Persian gulf states, including Abu Dhabi, are
estimated to hold the equivale~it of about $1 billion in foreign currencies -
largely dollars - in government and private accounts. While most Arab oil
interests still respect the dollar, they apparently believe they can no loneer
lace com fete confidence in an single currency.
Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET 5 April 1973
 Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET
Agricultural Developments in Eastern Europe
Good agricultural results throughout Eastern Europe last year
permitted the region to reduce grain imports, boost livestock production,
and improve domestic food? supplies. Current prospects for the 1973 winter
grain harvest are mediocre, however, and grain imports, mainly from the
West, may have to be increased next year.
In 1972, East European agricultural output (excluding Yugoslavia) grew
by an estimated 7.S% to a record level. As a result of last yew's bumper
grain harvest (73 million tons) and improved output of potatoes in the
northern countries, East European grain imports fell by 2 million tons, to
about 7 million tons. Grain imports from the West, however, remain at
a high level (4 million tons) because of reduced imports from the USSR.
US sales of more than 1.5 million tons to the region in FY 1973 are the
highest in a decade.
Prospects for 1973 indicate a smaller harvest of winter grain --
normally 50% of total production -than last year.
e In early March, most countries reported that the condition
of winter wheat was no better than average.
? March snows and sudden. thaws in Bulgaria and Romania
have caused some flooding of winter grain fields.
? Below-normal soil moisture reserves in the northern
countries and Hungary have reduced chances of good
spring growth needed to optimize yields.
A decline in grain output in the northern countries would boost
demand for imports in FY 1974 because of an estimated drawdown in
grain stocks this year and a need for feed grain to support high-priority
livestock programs. Any increased import demand would have to he filled
largely by Western exporters because the USSR is not likel to ex and
grain exports next year. 25X1
Approved For Release 2006/04/~(~~~p85T00875R0015gQ~~(~OQ~~
 Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET
Soviets Interested in Still More Grain?
Soviet shipping arrangements suggest ~ihat Ir'!oscow intends to buy large
quantities of grain in addition to the 5 million tons of corn it evidently
urchased from the United States recently.
If this tonnage were used exclusively for grain,
it would be sufficient to move almost 10 million tons annually from North
American ports to the Black Sea.
Soviet-owned ships employed in carrying grain from the United States
could handle another 9 million to 10 million toms a year on a full-time
basis. In addition, the USSR is required by its maritime agreement with
the United States to give US-flag ships, to the extent they are available,
the opportunity to carry at least one-third of US-Soviet trade. However,
because of more attractive rates in other trades, US ships have carried only
7?Jo of the US grain shipped to the USSR since 1 July 1972..
With time and voyage charter rates at very High levels and with suitable
snips hard to find, the Soviets apparently want to be in a position to handle
expeditiously any grain contracts negotiated over the next several months.
The extent of chartering rn
June and beyond will probably depend on a Soviet appraisal of the size
of their domestic grain crep. In the case of an above-average grain harvest,
the Soviets may well forgo further contracts for time charters.
"fire tonnage now being lined up by Moscow is suitable for carr in
grain from most potential suppliers
Approved For Release 2006/04/19 ~~~~~,~,5T00875R0015005 Ap081973
 Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET
Brazil's Soybean Potential: An Emerging Threat to US Exports
The United States continues to dominate the soybean market, but
Brazil's output and exports have been skyrocketing. Brazil's share of world
exports has jumped from 3% to 13% during the past four years, while the
US share slipped from 92% to 86%. Prospects are for a continuing rapid
rise in Brazilian sales.
Brazil's soybean output has soared from 650,000 tons in 1968 to a
likely current harvest of 4.7 million tons, partly because suitable land is
plentiful and the government actively promotes the crop. Most important,
Brazil produces soybeans much more efficiently than most other annual
crops. Soybean yields are approaching US levels, whereas yields for
alternative crops such as corn are only about one-third those in the United
States. This comparative advantage over other crops is so pronounced that
Brazilian farmers would profit from soybeans even at greatly reduced prices.
Brazilian soybean exports leave not yet cut into the sales volume of
the largest US agricultur:~l export, but they threaten future gains. Both the
United States and Brazil have benefited from an extraordinary spurt in world
demand that has boosted current soybean prices to a historic high. Because
of the record current harvest and continuing high prices, Brazil's soybean
exports in 1973 could reach $600 million -more than double last year's.
Prices, however, should fall by the end of the year; the United States also
expects a bumper harvest this fall, and Peru's fishmeal supplies - a close
substitute in livestock f;ed -should partly recover by then.
Brazil is almost certain to gain a larger share of world soybean exports
in the long run, especial:y if its competition pushes the price below the
historic norm of a little more than twice that of corn. At lowe prices,
some US farmers probably would switch land to other crops such as corn,
but Brazilian farmers probably would continue to nd soybeans most
profitable. Should Brazil achieve its 1980 output goal of ?0 million tons,
it could satisf about half of the ro'ected world im ort demand.
Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET 5 April 1973
 Approved For Release 2006/04/19 : ~F~~R
~00875R001500140008-9
East Asia Export Boom Planned to ~2ontinue
Exports from Taiwan, South Korea, and Hong Kong are expected to
grow rapidly through the mid-1970s, and much of the increase will be aimed
at the US market.
? Taiwan and South K~~rea project a comb?*~ed export
growth through 1976 of about 25% annually.
? Hong Kong's export prospe~~s also are excellent, and --
barring major new restraints -the three countries' sales
probably will reach at lea;,t $1 t; billion in 1976, compared
with $7.4 billion in 1972.
These projections suggest that exports to the United States
will at lust double by 1976, reaching $6.5 billion or
more.
? Further penetration of the US market will be aided by
the countries' improved ability to compete with Japan
following the yen's recent revaluation.
The three countries probably will increase their share of US imports
of various consumer products.
? They already account for about one-fifth of US consumer
electronics imports and are in a good position to raise
sales substantially.
? Exports of footwear, bicycles, and electrical appliances
also promise to grow rapidly.
? In addition, the countries probably will be able to export
more heavy industrial products. South Korea, for example,
is building a steel industry with an eye toward exporting,
any surplus production to the US market.
Although US sales to East Asia will increase, the trade deficit with
the region seems likely to expand.
? US sales to Taiwan, South Korea, and Hong Kong have
not kept pace vith US purchases in regent years, and the
$1.4 billion trade deficit with the three in 1972 was more
than twice that of 1971.
Approved For Release 2006/04/1 ~`C1'i~-'RDP85T00875R00150(~1~'lf~F~~73
 Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET
? A key factor has teen growing competition from Japan,
which expanded sales to the three cou:~tries by 18?!0
annually during 1969-72, compared with 11% gains by the
United States.
US sales in East Asia will benefit from the latest currency
realignments, bux Ja an nevertheless will remain a very
strong competitor.
Approved For Release 2006/04/1~~~A ~85T00875R00150514~pii181~73
 Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET
Publications of Interest
The Economic Situation in South Vietnam Monthl Re ort for Marcli
(CIA ER IM 73-38, March 1973,
Although major supply shortages due to road interdiction have been
alleviated, prices increased during March and are now up 1 I% for the year.
The government has imposed further restriction to conserve foreign
exchange. The land reform program, now ending its third year, has achieved
its goal of distributing 1 million hectare, of land to former tenant farmers.
Business investments were negligible in 1972, but development loan
approvals increased as investors continued to plan for future projects.
France: Balance-of-Payments Developments Since the Smithsonian
Agreement
(CIA ER IM 73-36, April 1973,
France's balance-of-payments position is likely to remain strong
because of French price competitiveness in world markets. Booming exports
pushed the trade surplus well past $1 billion in 1972. A large net outflow
of transfer payments, however, held down the curre7t account surplus, and
the basic balance was roughly in equilibrium. The substantial official
settlement surplus thus was due mainly to short-term capital inflows.
The Soviet Grain Situation in Fiscal Year 1974: A Preliminar View
(CIA ER WP 73-3, 2 April 1973,
The Soviets will probably need again to import large amounts of
Western grain in F`l 1974. Assuming normal weather and average yields,
the USSR can anticipate a grain crop of 153 million tons, 12 million to
17 million tons below expected domestic demand. Tltis probable deficit
can be compared with Soviet purchases of 26 million tons of grain in
FY 1973. Imports could rise above 17 million tons if the USSR attempts
to rebuild depleted buffer stocks.
9
Approved For Release 2006/04/19 :CIA-RDP85T00875R001500140008-9
SECRET 5 Ar~?1 ] 973