ECONOMIC INTELLIGENCE WEEKLY

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00875R001500150044-8
• Release Decision: RIPPUB
• Original Classification: S
• Document Page Count: 20
• Document Creation Date: December 22, 2016
• Document Release Date: September 29, 2009
• Sequence Number: 44
• Publication Date: October 9, 1974
• Content Type: REPORT

Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
Secret
Economic Intelligence Weekly
Secret
CIA No. 8223/74
9 October 1974
Copy N2 405
Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
Secret
25X1
US Trade Surplus with Western Europe Mounts; The
surplus jumped from $1 billion in the first seven months of
1973 to $3 billion this year, with both US agricultural and
industrial exports showing strength. (See
page 7.)
OPEC: Mammoth Oil Receipts; The OPEC countries will
receive about $94billion for their oil in 1974$33billion
in the first half, $61 billion in the second half.
(See page 2.)
LDCs Doubly Hit by Trade Trends; The trade balance of
non-OPEC developing countries has been worsening with
the industrial countries as well as with the oil countries.
(See page 3.)
LDCs: Financial Resources Dwindling; The successful
financing of the large first-half trade deficit masked an
increasingly serious payments position.
(See page 6.)
USSR: Long-Range Prospects for Hard Currency Trade;
The sharp increases in world prices for oil, gold, and other
primary products have dramatically improved Soviet
ability to import Western plants and technology over the
next several years. F______1(See page 8.)
French Negotiators are currently in Moscow to offer the
USSR approximately $1 billion in long-term credits at
7.3% to 7.7% for purchases over the next two years. Paris
wants to conclude a new accord with the USSR bofore
pursuing discussions on the proposed gentlemen's agree-
ment among the EC, Japan, and the United States on
export credits. Moscow is sure to use any low rate
other Western countries.
China-Philippines Trade Agreement; Chinese oil will be
exchanged for Philippine lumber, coconut products,
sugar, and copper.F_____1 (See page 13.)
Bonn Moves to Reshape EC Agricultural Policy; West
Germany is tired ci paying steep food prices and the lion's
25X1
Italy's Industrial Production slipped last month. August
statistics show that factory output decreased 4.6% from
August 1973, suggesting that the expected downturn in
economic activity has begun. On the positive side, the
trade deficit shrank to the lowest level this year and a
surplus of $89 million was recorded in the non-oil
account.
Canada's New Legislative Program, outlined at the
opening of Parliament, includes measures to create a
national petroleum corporation and to require more
processing of raw materials in Canada. Another bill calls
for Ottawa to intervene whenever a foreign-owned com-
pany is prevented from filling export orders because of the
policy of the company's government. Prime Minister
Trudeau should have no trouble getting his program
enacted, since he now has a commanding parliamentary
majority.
25X1
OECD Secretary-General Concedes Economic Weakness;
Van Lennep now doubts early upturn in the industrial
economies. (See page 12.)
Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
daily movements.
Soviet Attempt to Buy Grain; The current effort to buy
3.4 million toms from US dealers coincides with crop
difficulties, which have caused us to trim our estimate for
1974 from 198 million to 195 million tons, 10 million
tons below plan.
(See page 12.)
Gold was fixed at $155.10 per ounce in London yesterday
afternoon, down slightly over the week, which saw sharp
North Korea's Economic Tilt Toward the West (See page
25X1 13.)
USSR: Sugar Outlook Dims; Unseasonal cold weather is
cutting the crop at least 5% short of plan. The Economic Situation in South Vietnam, September
(See page 12.) 1974 (See page 13.)
Mexico: Continuing Heavy Need for US Corn; Early frost,
drought, and hurricane Fifi are frustrating Mexican efforts
to reduce dependence on US corn. (See
page 12.)
Recent Data Concerning Internal Economic Activities
(See page A-1).
Recent Data Concerning External Economic Activities
(See page A-2.)
The Dollar closed mixed against major foreign currencies
last week. The European joint float currencies gained from
1% to 1.3% against the dollar while the lira, French franc,
and Japanese yen declined. The British pound remained
unchanged.
ft
Secret
Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
BONN MOVES TO RESHAPE EC AGRICULTURAL POLICY
Chancellor Schmidt's initial rejection of the recent EC decision to raise
agricultural support prices is another skirmish in a protracted struggle to revamp
the CAP. The compromise worked out last week is merely a short-term, patchwork
solution.
West Germany is pushing hard for reform because it is fed up with paying
the lion's share of spiraling EC bills while other members reap most of the benefits.
This year, Bonn is financing 28%% of planned Community outlays of $6.1 biAion.
About three-fourths of the EC budget goes to support the CAP.
EC agricultural policy has been in trouble for several months:
? rising production costs have cut into farm incomes despite increasing CAP
assistance;
? cessation of official purchases of beef because of overburdened storage
facilities has allowed market prices to fall below support levels;
? France and Belgium have Unilaterally introduced treasures to assist their
farmers, in violation of EC rules, to the annoyance of the Germans in
particular;
? border taxes imposed to offset currency changes have continued to
hamper operation of the complex pricing system;
? Italy has imposed import-deposit requirements that interfere with
agricultural trade within the EC; and
? sugar shortages in the United Kingdom have dramatized Dritish objections
to EC membership (the EC has niled out special relations with
sugar-exporting Commonwealth states).
In exchange for its final acquiescence to a 5% rise in support prices, Bonn
was promised that the increase would be deducted from next spring's scheduled
Note: Comments and queries regarding the Economic Intelligence Weekly are welcomed.
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
Secret
adjustment. It also extracted pledges that future unilateral measures would be
submitted to the Community for prior approval and that the CAP would be
subjected to a fundamental review.
Bonn's desire to reduce the costs of CAP implies that the relatively inefficient
West German farmer may be headed for more difficult times despite his political
clout. The non-farm segment (90%%) of the population has become more and more
critical of rising food prices. Recent studies claiming that farm incomes exceed
the national average have been widely publicized in the West German press, fueling
consumer dissatisfaction with high food prices. The government seemingly views
CAP reform as a key part of its anti-inflation fight.
OPEC countries will earn more than $100 billion from oil exports in 1974.
Because of the average two-month payments lag, they will actually receive about
$94 billion -- $33 billion in the first half and $61 billion in the second half.
Second-half payments will fully reflect last January's price increases and most of
the July increase.
OPEC Oil Receipts, 1974
1st
Quarter
2d
Quarter
3d
Quarter
4th
Quarter
Total
Total
Estimated receipts
(excluding retroactive
11
22
31
30
94
payments)
Estimated retroactive pay-
11
21
24
25
81
ments by oil companies
....
1
7
5
13
Oil receipts in the second half will be boosted by anticipated retroactive
payments of $13 billion. When concessionaires complete such payments in early
1975, OPEC revenues should level off. Receipts will bulge in October as a result
of quarterly payments to certain producers and a probable $2.2 billion retroactive
2
Secret
Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
payment to Saudi Arabia. As a consequence, extra large amounts of oil money
mry flow to the New York market. A similar bulge in July was handled smoothly
by private markets, but both Western bankers and officials for OPEC countries
note that the Eurodollar market is now saturated with short-term oil dollars
LDCs DOUBLY HIT BY TRADE TRENDS
The trade balance of non-OPEC developing countries has been worsening, not
only with oil countries but also with industrial countries. Data for the first half
of 1974 show a $3 billion adverse shift in their trade with Japan, West Germany,
and the United States alone, compared with first half' 1973. This was on top of
a $14 billion deterioration in their balance with OPEC countries. In trade with
all OECD member countries, the deterioration was an estimated $4 billion.
The tables present data on the merc1 andise trade of five major developed
countries (the United States, the United Kingdom, Japan, West Germany, and
Canada) with the OPEC and non-OPEC developing countries. The remarkable
increase in exports to the non-OPEC countries in the first half of 1974 is
attributable more to price than to volume increases. The deterioration in the trade
balances of non-OPEC developing countries wider these circumstances suggests that
the oil burden of developed countries is being partially shifted to these countries.
The non-OPEC countries are trapped between an inelastic demand for grain and
fertilizer and limited ability to raise theirown exports to the recession-hit developed
countries. Furthermore.:,rtain of these countries - such as Brazil, the Philippines,
Taiwan, and South Korea - regard capital goods and industrial raw materials as
vital to their growth and are unwilling to cut back these imports.
3
Secret
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
Secret
Merchandise Trade, Selected Developed Countries'
Exports
Imports
Trade
Balance
Exports
Imports
Trade
Balance
Trade
Balance
Change
United States
Total trade
33,217
33,270
-53
48,052
46,992
1,060
1,113
Developing countries
9,201
9,139
62
15,210
17,894
-2,684
-2,746
OPEC
1,699
1,831
-132
2,740
6,505
-3,765
-3,633
Other
7,502
7,308
194
12,470
11,389
1,081
887
United Kingdom
Total trade
14,609
16,242
-1,633
18,196
23,834
-5,638
-4,005
Developing countries
3,161
3,528
-367
3,589
6,484
-2,895
-2,528
OPEC
852
1,361
-509
1,030
3,923
-2,893
-2,384
Other
2,309
2,167
142
2,559
2,561
-2
-144
West Germany
Total trade
29,810
22,787
7,023
43,033
30,000
13,033
6,010
Developing countries
3,288
3,580
-292
5,495
6,681
-1,186
-894
OPEC
982
1,459
-477
1,609
3,965
-2,356
-1,879
Other
2,306
2,121
185
3,886
2,716
1,170
985
Japan
Total trade
15,927
14,284
1,643
23,589
26,367
-2,778
-4,421
Developing countries
6,252
5,517
735
10,60_3
13,922
-3,309
-4,044
OPEC
1,102
2,660
-1,558
1,975
8,924
-6,949
-5,391
Other
5,150
2,857
2,293
8,638
4,998
3,640
1,347
Canada
Total trade
12,282
11,321
961
15,614
15,209
405
-556
Developing countries
985
1,019
-34
1,366
2,083
-717
-683
OPEC
152
404
-252
154
1,145
-991
-739
Other
833
615
218
1,212
938
274
56
1. Official data of value of exports and imports, by country of origin and by country of destination, converted to US currency
and/or f.o.b. values where required, with the following exceptions: for Canada, reexports arc excluded from developing country data;
for the United States, exports are f.a.s. and imports are on customs value basis; and for Japan, certain trade data have been
interpolated for developing countries.
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
United
States'
United
Kingdom'
West
Germatyt
Japan'
Canada'
All
Countries2
Argentina
First half 1973
Exports
116.8
127.5
180.1
58.5
5.2
1,488
Imports
171.1
53.4
104.3
74.4
22.3
926
Trade balance
-54.3
74.1
75.8
-15.9
?17.1
562
First half 1974
Exports
180.3
121.6
136.5
70.2
10.4
1,840
Imports
238.2
46.6
153.8
152.2
18.8
1,350
Trade balance
-57.9
75.0
-17.3
-82.0
-8.4
490
Brazil
Trade balance change
-3.6
0.9
-93.1
-66.1
8.7
-72
First half 1973
Exports
569.2
149.0
256.2
138.3
37.7
2,645
Imports
745.1
125.9
320.1
229.0
38.5
2,500
Trade balance
-175.9
23.1
-63.9
-90.7
-0.8
145
First half 1974
Exports
740.6
202.1
251.2
228.3
49.8
3,076
Imports
1,488.8
158.9
683.1
551.9
113.1
5,008
Trade balance
-748.2
43.2
-431.9
?323.6
-63.3
-1,932
India
Trade balance change
-572.3
20.1
-368.0
-232.9
-62.5
-2.077
First half 1973
Exports
207.4
150.4
53.6
244.8
15.8
1,353
Imports
198.8
166.4
99.9
152.7
84.6
1,213
Trade balance
8.6
-16.0
-46.3
92.1
-68.8
140
First half 1974
Exports
270.5
199.3
71.4
323.3
22.3
N.A.
Imports
202.4
147.5
178.1
276.2
47.9
N.A.
Trade balance
68.1
51.8
-106.7
47.1
-25.6
N.A.
South Korea
Trade balance change
59.5
67.8
-60.4
-45.0
43.2
N.A.
First half 1973
Exports
467.8
23.7
570.0
38.3
38.5
1.241
Imports
606.9
25.6
421.8
72.5
25.3
1,720
Trade balance
?139.1
-1.9
148.2
-34.2
13.2
-479
First half 1974
Exports
604.5
59.8
516.5
78.3
65.4
N.A.
Imports
795.7
48.7
669.3
127.5
42.9
N. A.
Trade balance
-191.2
11.1
-152.8
-49.2
22.5
?795
Pakistan
Trade balance change
?52.1
13.0
-301.0
-15.0
9.3
-316
First half 1973
Exports
16.7
36.9
21.2
78.5
3.9
520
Imports
10!.5
33.8
38.5
33.9
7.2
4(13
Trade balance
.84.8
3.1
-17.3
44.6
-3.3
117
First half 1974
Exports
30.5
51.8
27.6
37.4
8.6
1993
Imports
225.4
51.6
57.6
86.1
56.0
315
Trade balance
-194.9
0.2
-30.0
-48.7
-47.4
-116
Paraguay
Trade 7alance change
-110.1
-2.9
-12.7
-93.3
-44.1
N. A.
First half 1973
Exports
8.6
17.8
20.3
4.9
0.4
74
Imports
14.0
4.9
9.8
1.7
0.2
49
Trade balance
-5.4
12.9
10.5
3.2
0.2
25
First half 1974
Exports
8.6
15.1
11.6
4.6
1.0
223
Imports
12.8
7.7
13.7
22.6
0.3
27
Trade balance
-4.2
7.4
-2.1
2.0
0.7
-i
Philippines
Trade balance change
1.2
-5.5
-12.6
-1.2
0.5
N.A.
First half 1973
Exports
273.8
9.2
47.8
336.2
4.6
862
Imports
211.9
28.8
33.8
267.1
13.5
662
Trade balance
61.9
-19.6
14.0
69.1
-8.9
200
First half 1974
Exports
428.7
16.2
47.0
505.2
6.1
1.0824
Imports
372.8
56.7
74.4
410.2
21.6
I ., ,4
Trade balance
55.9
-40.5
-27.4
95.0
.15.5
-112
Trade balance change
.6.0
-20.9
41.4
25.9
-6.6
N.A.
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
Secret
Trade Balances, Selected Developing Countries
(Continued)
Million US 5
United
Stalest
United
KingdomI
West
CennanyI
Japans
CanadaI
All
Countries2
Sri Lanka
First half 1973
Exports
I
14.5
26.6
6.4
17.9
4
0
181
mports
14.4
13.1
6.2
0.9
,
3
1
185
Trade balance
0.1
13.5
0.2
8
0
.
0
9
4
Exports
I
20.7
29.6
1.5
.
9.6
.
6.6
.
7393
mports
9.9
10.5
19.1
20.3
2
2
561
Trade balance
10.8
19.1
-7.6
-10.7
.
4
4
178
Taiwan
First half 1973
Trade balance change
Exports
I
10.7
799.4
5.6
47.4
-7.8
92.3
18.7
343.8
.
3.5
72
6
N.A.
1
768
mnorts
T
d
457.3
23.2
75.7
672.1
.
14
3
,
1
445
ra
e balance
E
342.1
24.2
16.6
.328.3
.
58
3
,
323
xports
I
1,012.9
76.9
121.4
476.9
.
106
3
1
4053
mports
806.6
57.0
174.2
1,085.1
.
23
6
,
1
2
1
1
Trade balance
T
d
206.3
19.9
-52.8
-608.2
.
82.7
,
1
)
144
Zaire
First haif 1973
ra
e balance change
Exports
I
-135.8
30.1
-4.3
25.1
?69.4
31.1
-279.9
27.3
24.4
2
4
N. A.
N
A
mports
T
47.0
12.5
41.2
23.2
.
0
6
.
.
N
A
rade balance
?16.9
12.6
?10.1
4.1
.
LS
.
.
N
A
Exports
2
29
45
4
.
.
Imports
T
d
.
77.9
.
23.2
50.0
56.7
58.1
21.2
2.6
2..i
N.A.
N
A
ra
e balance
48.7
22.2
-6.7
36.9
0
3
.
.
N
A
Trade balance change
?31.8
9
6
3
4
.
.
.
.
.
32.8
.1.5
N.A.
I, Data ual Jevcloped country ofOcial trade publicatlom of exports and import valus, by nnmtry of Jextinatimn ad by cuuatry of origin.
2. bola IMP have databeen converted to US currency and/or f.o.b. bails where required, with the following exceptions: for Canad ma, reexports are excluded
from developing country data, and for the United States, exports are f.a.s. and imports are on customs value bails.
data, except data for South Korea for first bat- 1974.
3. firs) quarter 1974.
4 January-May 1974.
x X x X
LDCs: FINANCIAL RESOURCES DWINDLING
The successful financing of' large trade deficits by non-OPEC LDCs in the first
half' of' 1974 masked an increasingly serious payments position. The short-term
outlook is for further deterioration in LDC trade balances with both OPEC and
developed countries. Private credit will be harder to obtain. A substantial drawdowll
of' reserves during the ne; t 12 months is likely, and forced cutbacks in imports
may be necessary in some cases.
The non-oil LDCs had an estimated current account deficit of' $8 billion to
$9 billion in the first half' of' 1974. Preliminary data indicate that they received
aid of' $6 billion to $7 billion and arranged for medium-term Eurocurrency loans
of $4.2 billion. As it result, reserves increased by $2 billion to $32.5 billion, which
is widely scattered except for Brazil's $6 billion. In the first half of' 1973. in
contrast, when prices of many commodities other than oil were soaring, reserves
rose by $6 billion with net capital inflows of' only $2 billion.
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
Because of' further increases in rr-_: s, thr LDC oil import bill will be about
$1 billion to $2 billion higher in the second half than in the first. Furthermore,
the LDC trade deficit with the developed countries will worsen until the developed
economics pick up. Unless measures are taken to reduce imports, the LDC current
account deficit will rise by another $2 billion to $3 billion in the second half'
of 1974.
The LDCs cannot count on maintaining or increasing their present borrowing
levels from private capital markets. Unless they receive sharply higher aid payments,
they will be hard pressed to cope with their rising deficit.
US TRADE SURPLUS WITH WESTERN EUROPE MOUNTS
Western Europe's massive trade deficit with the oil producers this year is being
aggravated by a deteriorating balance with the United States. In the first seven
months, US exports to the area grew by 42% from the year-earlier level - almost
twice the rise for US imports. The US surplus with Europe jumped from $1 billion
(imports f.o.b.) in the first seven months of 1973 to $3 billion this year. The
gain covered about one-fifth of the rise in the US oil import bill.
Weak demand in the United States held the growth in US import volume
to a mere 1% while prices rose by 2317o. Purchases of steel, machinery, clothing,
and certain agricultural products actually declined in real terms. In contrast,
purchases of European petroleum products showed a large increase in volunv .
On the US export side, sagging grain sales were offset by increased soybean
shipments and by sharply higher prices for agricultural products in general.
Industrial exports remained strong, with a 41% gain evenly divided between volume
and price increases. Above-average increases in volume were posted for metals, wood
products, and textiles. The slump in the international airline industry caused the
volume of aircraft exports to dip.
In a reversal of recent trends, the US trade deficit with West Germany
narrowed to $770 million. Revaluation of the nark has been an important factor
in declining US purchases of German automobiles and other durables. The US trade
balance also improved wit;: all other major countries in Western Europe.
7
Secret
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
STAT
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
US - West European Trade1
Million US $
Jan-Jul 1974
US Balance
Jan-Jul
US Exports
US Imports
1973
1974
Total Western Europe
16,766
13,506
922
3
260
Of which:
European Community
12,897
}0,951
512
,
1
946
Of which:
Belgium/Ltu:embourg
1,362
928
185
,
434
France
1,683
1,199
322
484
Italy
1,671
1,544
96
127
Netherlands
2,331
814
1,119
1,517
United Kingdom
2,580
2,310
-117
270
West Germany
2,943
3,711
-1,042
-768
The US surplus with Western Europe is expected to climb to $5 billion by
yearend. Although the volume of US agricultural sales will be held down by
disappointing grain harvests, prices should be well above the level prevailing earlier
this year. Growth in bilateral industrial trade in the last live months of 1974 will
be sluggish, since GNP gains in both the United States and Europe are expected
USSR: LONG-RANGE PROSPECTS FOR HARD CURRENCY TRADE*
The sharp increases in world prices for oil, gold, and other primary exports
have dramatically improved Soviet earnings in hard currency markets. In 1974 the
USSR will probably achieve a trade surplus with hard currency countries of $1 .5
billion in contrast with the deficit of $1.75 billion in 1973. The USSR almost
certainly will continue to earn ample foreign exchange to pay for all the Western
plants and technology it can absorb over the next few years.
* This is an abslrarct of the forthcoming ER IR 74-27, USSR: Long-Range Prospects for Hard Currency
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
 Swrrwl
Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
This striking improvement in Soviet export prospects presents Moscow with
policy choices it lacked when large trade deficits had to be covered by Western
credits and drawdowns of gold holdings. Soviet officials now have more flexibility
in weighing:
? the extent to which the USSR seeks and uses Western credit, i.e., cash
will be paid unless terms are deemed especially favorable;
? the choice between sales of gold and the buildup of' gold reserves; and
? the terms offered to Western countries on commodity payback ventures.
Outlook for 1974
Soviet exports probably will rise by 55% in 1974, chiefly because of the more
than doubling of the price obtained for oil - $10 or more per barrel in 1974,
compared with an average of $4.50 in 1973. Oil alone could earn the Soviets
$3 billion in 1974, and total hard currency exports may reach $7.5 billion. At
the same time, the record grain harvest of 1973, which permitted the rebuilding
of stocks, will mean substantially reduced outlays for agricultural products.
Outlook after 1974
Merchandise Exports
Although price increases in international markets are expected to tail off after
1974, world demand for many of the USSR's major exports - such as oil, natural
gas, coal, timber, and diamonds - should remain strong. The USSR should also
be able to increase the physical volume of exports of these and other goods. During
the remainder of the 1970s, earnings from exports alone could support an annual
import growth of 221h.
In the 1980s, export growth probably will slow down as the quantity of oil
available for export diminishes and deliveries of natural gas to Western Europe
level off. The annual rate of import growth sustainable from merchandise exports
will fall to roughly 10%.
Commodity Payback Ventures
Additional export revenues may be earned from commodity payback ventures.
The Soviets have concluded a number of these ventures involving Western assistance
Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
 Secret
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
USSR: Hard Currency Balance of Payments
Million US $
Exports ( f.o.b.)
4,817
7,500
Imports (f.o.b.)
6,566
6,000
Merchandise balance
-1,749
1,500
Net services and transfers
-127
-94
Current account balance
-1,876
1,406
Not medium-term
and long-term capital
1,0092
552
Basic balance
-867
1,958
Non-monetary gold
950
3
Net short-term capital,
change in foreign currency balances,
and errors and omissions
83
N.A.
1. Estimated.
2. Including Soviet compensation payments of $24 million in accordance with US
lend-lease "pipeline" agreements.
3. About $300 million to date.
in the development of natural gas, chemical, timber, and coal resources in return
for long-terns Soviet raw material exports.
exports from such deals could increase Soviet import capacity by roughly $4 billion
annually in 1981-85, at a time when export earnings from traditional transactions
are expected to decline.
In contrast to the long-term effects of commodity payback ventures, a decision
to sell gold would have an immediate impact on Soviet import capacity. At the
estimated long-run price of $ 150 per ounce, sales from current production alone
could increase the average annual import capacity by about $1.7 billion over
the short run and by roughly $2 billion in 1981-85.
Although the USSR will continue to draw on the large volume of Western
credit already extended, Moscow may have little need to solicit additional credits
to increase imports substantially during 1975-80. If they chose, however, the Soviets
could increase credit drawings by up to 25% annually in 1975-80 without incurring
serious problems of debt management. As long as Western governments continue
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
to offer long-term credits at interest rates below expected world inflation rates,
Moscow presumably will continue to rely heavily on credits while curtailing exports
of gold and/or goods whose real worth is expected to increase over time.
The use of credit in 1981-85 will be determin' d in part by the size and
composition of Soviet debt carrying over from 1980. To compensate partially for
the expected decline in the growth of merchandise exports, the Soviets might make
extensive use of Western credits. heavy drawings could increase annual import
capacity by $3 billion or more at the expense of' greatly increased debt and debt
service.
likely Policy Options and Import Growth
In 1975-80 the USSR has a number of' options made available by the striking
switch in its balance-of-payments position. Without an undue increase in its debt
service, the USSR could sustain an average annual growth of' hard currency imports
of up to 30% in money terms and perhaps 201% in real terms. Because a ~Inajor
portion of increased imports will consist of advanced Western plants and technology,
the USSR undoubtedly can not assimilate imports at this capacity level. At the
same time, past Soviet policy suggests that augmented import capacity will not
be used to support a massive increase in imports of' consumer goods or to build
large hard currency balances. Most likely is a cnmbination of'
? increase in the rate of growth of' imports (but short of potential maximum
growth);
? discreet use of Western credits;
? sales of' gold below current production levels, and
? signing of' commodity payback deals only under favorable terms.
In 1981-85, Moscow's policy mix will be af'f'ected by (I) the extent to which
credit was used in 1975-80 and (2) the degree of Soviet foresightedness in arranging
commodity payback deals. Even under the most favorable conditions and with
maximum credit use and sale of all current gold output, the annual average growth
of import capacity in 1981-85 probably would not be much more than 1511" in
money terms, considerably less in real terms. Nonetheless, the $30 billion in annual
import capacity forecast for this period almost certainly will be adequate to satisfy
Soviet needs for Western equipment, technology, and other goods.
Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
 Secret
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
Notes
OECD Secretary-General Concedes Economic Weakness
Secretary-General Emile van Lennep now doubts that the OECI)'s projection
of an early upturn in the industrial economies will materialize. Our estimates put
growth for the six major foreign OECD economics at an annual rate of only 1.51%,
in the second half of' 1974, compared with the OECD's 3.7'/x. Van Lennep maintains
his position that an economic slowdown must be accepted to wind down inflation.
STAT
Soviets Attempt to Buy Grain
The current Soviet attempt to buy 2.4 million tons of' corn and 1 million
tons of' wheat from US dealers reflects shortfalls in Soviet production this year.
We have just trimmed our estimate of the 1974 grain crop from 198 million to
195 million tons - 10 million tons below the official goal and 5 million to 15
million tons below requirements. Unfavorable weather has reduced the wheat crop
to an estimated 85 million tons -- the smallest since 1969. Perhaps 20(lo of' tile
corn crop will not mature in time to be harvested for grain because of' late planting
and a cool growing season. Moscow's entry into the grain market suggests that
the regime will not jeopardize its livestock expansion program by permitting a
sharp rundown in carryover stocks of' grain, estimated at 20 million to 30 million
tons.
USSR: Sugar Outlook Dims
The sugar be~.:c crop has been hurt by late-summer cold weather. Undersized
sugar beets in several important producing areas and extensive flowering in other
areas will lead to a crop at least 5% short of the planned goal of' 91.3 million
tons. Nonetheless, coupled with the usual imports from Cuba of about 2 million
tons, this year's crop should cover domestic requirements.
Mexico: Continuing Heavy Nee,] for US Corn
Widespread crop damage in Mexico has tripled the earlier estimate of corn
import needs in 1974/75 to 1.3 million tons. Foodgrain imports - 90% of' which
traditionally come from the United States - thus will probably continue at the
high level of the previous two years. Corn production in 1974/75 1, now put at
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
oecrey
8.1 million tons, 15% below initial forecasts. The crop has been reduced by early
frost, which destroyed 700,000 tons, and by scattered damage from drought and
I?urricane Fifi.
China-Philippines Trade Agreement
The recent agreement between Manila and Peking provides a solid basis for
expansion of trade and reduction of the Philippines' near-total dependence on Arab
oil suppliers. China has pledged "considerable" t. ude oil exports, and Manila is
expected to request 15,000 b/d (811o of annual requirements) in 1975 for openers.
Manila expects the figure to rise to 50,000 b/d by 1979. Philippine exports to
China will feature lumber, coconut products, sugar, and copper.
North Korea's Economic Tilt Toward the West
(ER IR 74-25, October 1974,
North Korea has quietly turned to the West as a major source for its modern
machinery and equipment. This shift in policy reduces Pyongyang's longstanding
dependence on the USSR and other Communist countries for capital equipment.
Since 1970, North Korea has signed contracts with firms in Japan and Western
Europe for almost $600 million worth of industrial plants and related equipment,
a sizable portion on credit.
The Economic Situation in South Vietnam; September 1974
(ER IR 74-26, September 1974,
Declining food prices slowed the rate of inflation in September; the overall
price index is up by nearly 40`% this year. This issue also discusses (1) improvement
in Saigon's rice stock;, over last year, (2) evidence that monetary expansion has
contributed to inflation in 1974, (3) continued erosion of real incomes, and
(4) progress in providing credit for industrial expansion through South Vietnam's
two main industrial credit banks.
Approved For Release 2009/09/29: CIA-RDP85T00875R001500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
INTERNAL ECONOMIC INDICATORS
GNP'
Constant Market Prices Average Annual
Growth note since
W
Ind
HOLES
ustrial
ALE PRICES
Average Annual
Growth hate Since
Percent Changd
latest tram Previous I Yuar Previous
Quarter Guenter 1910 Earlier Quarter
Percent Change
Latest from Previous I Year 3 Months
Month Month 1970
li
United States
7411
-0.4
3,6
-1,2
-1.8
Uni
ted State
s
Aug 74
2
4
9
8
Ear
er
5
27
Earlier
9
32
Japan
74 II
0,6
5.7
-3.3
2.4
Jap
an
Aug 74
.
1.0
.
11
3
.
32.8
.
14
9
West Germany
74 II
- 0,7
3.1
1,1
- 2.9
We
st Germa
ny
Jun 74
0.2
.
7.0
13.1
.
10.3
France
73 IV
1.8
5.8
5,7
7.3
Fra
nce
Aug 74
-0.7
12.4
30.3
-2.5
United Kingdom
74 I
-3.5
1.9
-4.4
-13.3
Uni
ted Kingd
om
Aug 74
1.3
11.3
25.3
19.3
Italy
73 IV
1.9
3.7
5.3
7.7
Ital
y
May 74
0.7
14.5
48.3
44.1
Canada
7411
-2.7
5.0
2.3
-10.3
Can
ada
Jun 74
0.1
10.9
23.5
16.1
Average Annual
Growth Rate Since
Average Annual
Growth Rate Since
Percent Change
Latest tram Previous I Year 3 Months
Percent Change
Latest from Previous 1 Year 3 Months
Month Month 1970 Earlier Earlier*,
Month Month 1970 Earlier E
li
United States
Aug 74 I
-0.4 I
4.0
-1.0
1.3
Uni
ted State
s
Aug 74
6
4
11.2
ar
er
2
13
Japan
Aug 74
-2.2
5.6
-4.9
-11.6
Jap
an
Aug 74
.
11.5
25.4
.
15.4
Waist Germany
Jun 74
-2.8
2.7
1.1
-2.2
We
st Germa
ny
Aug 74
8.1
6.9
2.5
France
Jun 74
0.8
6.2
5.0
2.2
Fran
ce
Aug 74
8.2
14.5
13.4
United Kingdom
Aug 74
0
2.5
-0.2
5,4
Unit
ed Kingd
om
Aug 74
10.4
16.8
8.4
Italy
Jul 74
-2.5
5.0
4.2
1.8
Ital
y
Aug 74
10.3
20.5
28.9
Canada Jul 74
0.8
5.8
1.9
-5.0
Can
ada
Aug 74
6.7
10.8
12.7
RETAIL SALES'
Current Prices Average Annual
Grorgh Rate Since
Average Annual
Growth Rate Since
Percent Change
Percent Change
Latest tram Previous I Year 3 Months
Latest from Previous 1 Year 3 Months
Month Month 1970 Earlier Earlier"
Au
74
U
it
d S
Month Month 1970 Earlier Eas
ip
"
n
e
tates
g
0.8
10.1
9.9
13.5
Unit
ed States
Aug 74
0.3
5.9
5.4
9
d
Japan
May 74
4.7
13.0
15.9
-1.7
Japa
n
Jun 74
1.6
17.9
15.7
17.6
West Germany
Jun 74
-1.5
7.7
2.0
1,5
Wes
t German
y
Jun 74
2.0
9.2
5.3
10
4
France
May 74
6.2
8.5
18.1
1.3
Fran
ce
Jun 74
1.3
12.7
10.7
.
15
6
Uni::.l Kingdom
Jun 74
3.3
11.9
14.7
8.3
Unit
ed Kingdo
m
Aug 74
1.2
P.8
0.8
.
3
5
Italy
Apr 74
0,9
17.4
27
0
34
0
.
.
.
Italy
Jan 74
0.1
20.7
22.7
22
5
Canada Jul 74
1.7
12.4
16.2
24.6
.
Cana
da
Aug 71 -0.7 12.3 7.3
I Year 3 Months I Month
Representative Rates Latest Date Earlier Earlier Earlier
United States
Dealer-placed finance paper
Sep 25
1 10.93
8.75
9.00
12.00
Japan
Call money
Sep 18
13.00
8.75
12.83
13.75
West Germany
Interbank loons (3Months)
Sep 25
9.40
13.84
9.60
9.50
France
Call money
Sep 18
13.50
10.75
14.50
13.75
United Kingdom
Sterling interbank loan (3 real
Sep 25
11.77
13.13
13.27
12.84
'Saaaanully adjusted.
"
Canada
r
fi
S
25
Average ter latest 3 months compared
nance pape
ep
11.19
8.75
11.00
11.78
with average for previous 3 months
Euro?Dollars
Three-month deposits
Sep 25
11.60
10.80
13.41
13.91
.
9 October 1974
Office of Economic Research/CIA
taaalt'- Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8
EXTERNAL ECONOMIC INDICATORS
EXPORTS"
f.o.b.
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
IMPORTS"
f.o.b.
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
TRADE BALANCE'
f.o.b./f.o.b.
Japan
West Germany
France
United Kingdom
Italy
Canada
Aug 74
Aug 74
Aug 74
Aug 74
And 74
Juu 74
Aug 74
-1,031
16,184
-2.859
-8,008
-4,050
592
4,865
7,907
4,044
3,237
2,270
2,897
Million US$
Million US S 1974 1073
I 8,370 1 03,2881 44,014
34,365
58,603
30,297
23,403
13,288
21,189
22,847
42,466
23,434
18,618
9,401
18,329
Million US S
Million US $ 1974 1913
Aug 74 9,502 85,402 44,870
Aug 74 4,474 35,390 19,926
Aug 74 6,007 42,419 32,617
Aug 74 4,489 33,157 22,621
Aug 74 3,986 31,400 21,385
Jun 74 2,827 17.338 10,708
Aug 74 2,886 20,597 14,884
1973
-856
2,721
9,849
813
-2.787
-1,307
1.445
Aug 74
Aug 74
Aug 74
Aug 74
Aug 74
Jun 74
Aug 74
Million UL $ 1974
1-1,132 1 -2,113
391
1,840
-445
-749
-556
11
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Percent
Clmn9u
43.8
51.7
38.0
29.3
25.7
41.3
29.8
Percent
Change
46.8
77.6
30.1
46.0
47.2
61.9
38.4
Chaotic
-1,257
-3,752
6,335
-3,672
-5.299
-2,743
-853
Million US $ 1974 1973 Change
74 II -2,740
-954 -2,164 1.210
Aug 74 -233 -9,204 -6,020 -3.263
Jul 74 288 5,073 4.929 144
73 IV -431 N.A. 2.471 NA.
741 84 84 -1,033 1.117
14 1 - 2,037 -2,037 975 -3,012
741 -195 -195 -235 40
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
End of Billion US $ Jun 1970
Aug 74 15.5 14.5
Sep 74 13.2 4.1
Jul 74 33.9 8.8
Aug 74 8.5 4.4
Sep 74 7.2 2.8
Jun 74 5.3 4.7
Sep 74 5.8 4.3
1 Year
Earlier
12.9
14.8
34.1
11.2
6.4
6.0
5.7
'Seaao~ally adjusted.
"Coev.ned into US dollars at current market telex of exchange.
9 October 1874
Months
Earlier
14.9
13.4
33.8
8.1
6.1
6.7
6.1
A2
EXPORT PRICES
USS
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
EXPORT PRICES
National Currency
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
IMPORT PRICES
National Currency
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
Percent Change--
Latest fruit Previous
Month Month 1970
Aug 74 5.7 12.9
Aug 74 0.1 16.1
Jul 74 2.2 15.3
May 74 0.6 14.3
Apr 74 5.9 12.5
Apr 74 5.8 13.3
May 74 1.5 14.9
Percent Chanuo
Latest from Previous
Month Month 1910
Aug 74 5.7 12.9
Aug 74 4.1 11.3
Jul 74 3.4 5.4
May 74 0.7 10.4
Apr 74 3.8 12.0
Apr 74 5.6 13.8
May 74 0.8 12.4
Percent Change
Latest frann Previous
Month Month 1970
Aug 74
Jul 74
May 74
Apr 74
Apr 74
May 74
EXCHANGE RATES Spot Rate
As of 4 Oct 74
JapanlYenl
West Germany (Deutsche
France (Franc) (pound
United Kingdom Sterling)
Italy liiral
Canada (Dollar)
US S
Pet Unit
0.0033
0.3830
0.2110
2.3350
0.0015
1.0158
19.8
17.3
6.8
16.0
21.5
26.0
10.6
Average Annual
Growth Rate Since
I Your
Earlier
27.9
25.3
7.9
19.7
23.:1
29.4.
44.1
3 Months
Earlier
43.9
- 0.1
17.9
50.1
109.7
73.9
59.3
Average Annual
Growth Rate Since
I Year
Earlier
27.9
42.8
18.0
29.4
28.8
39.6
38.2
3 Months
Earlier
43.9
39.8
23.0
48.8
57.7
63.6
48.5
Average Annual
Growth Rate Since
I Year
Earlier
53.4
77.8
32.7
63.0
61.6
90.8
28.7
18 Dec
1971
2.86
23.43
7,16
10.39
12.38
1.C0
19 Mar
1973
-12.17
8.16
4.26
-5.12
-14.86
1.81
2.6
0.4
4.0
3.5
5.4
3.4
Dec 66
21.06
52.35
4.51
16.33
-5.87
10.13
TRADE-WEIGHTED EXCHANGE RATES"'
United States
Japan
West Germany
France
United Kingdom
Italy
Canada
1'1 Dec
Dec 66 1971
14.15 '- 4.89
12.81 -0.71
30.31 13.35
16.49 - 3.15
34.75 20.54
27.00 25.88
7.73 1.14
19 Mar
1973
1.70
12.53
8.33
- 5.61
- 6.14
? 18.74
2.78
3 Months
Earlier
34.9
16.6
21.8
74.4
89.5
163.4
54.2
2' Sep
1974
-0.65
1.73
0.24
0.09
-0.33
0.08
27 Sep
1974
-0.26
-0.96
1.08
- 0.66
0.61
-1.23
"'Weighting is based on each listed country's trade with 16 other industrialized
cuuntrias to reflect the competitive impact of exchange-rate variations
among the major currencies.
Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150044-8