The Commonwealth in World Trade 1973–74

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Author(s):
Commonwealth Secretariat
01 Jan 1975
Pages:
138
ISBN:
9781848592230 (PDF)
http://dx.doi.org/10.14217/9781848592230-en
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  • Introduction

    In the year 1973, international trade was dominated by high levels of demand, the international spread of rapid price inflation and large changes of relative prices, leading to major swings in the terms of trade of particular countries according to the composition of their exports and imports.

  • Trends in international trade

    The emergence, in phase, of the major industrial countries from the recession of 1971–72 into the exceptionally strong investment and production boom of 1973, was reflected in an unprecedentedly large rise in the estimated volume of world output (excluding services), which went up by 8 per cent. This figure compares with one of 5 per cent in the preceding year and an annual average growth of 5.5 per cent from 1961 to 1971. Following a decline of about 1 per cent in 1972, world agricultural output advanced by 4 or 5 per cent.

  • Commodity trends and arrangements

    In 1973 the general increases in primary commodity prices were steeper and more widespread than in any period since the Korean war. Beginning late in 1972, prices in international trade began to move upwards at a rapid pace: this upsurge continued throughout 1973 and, in the case of many individual commodities of export interest to Commonwealth countries, new peaks were reached in 1974 (see Table III). As shown below, the dollar-based index of the National Institute of Economic and Social Research (London) recorded 1973 on 1972 rises of the order of 50 per cent for export prices of primary commodities.

  • Commodity terms of trade

    A heightened international awareness of problems concerning price and other terms of international exchange between commodities and manufactures found articulate expression at the meeting of Commonwealth Heads of Government in Ottawa, August 1973. The theme was then taken up again at the United Nations General Assembly in December of that year, and at the Sixth Special Session of the General Assembly meeting in New York in April 1974. Against this background it is interesting to examine the factual record of the past decade and more, as set out in Table IV.

  • Country terms of trade

    How individual countries and groups of countries fared in 1973, in the face of commodity price fluctuations, depended on the composition of their trade. The terms of trade of developed market economies fell back by one point, though North America, whose commodity exports and imports roughly balance, experienced no significant change, and Oceania – with high wool, food and minerals prices – made great gains. Within the rest of the developed world, Britain, Italy and Japan suffered severely on the terms of trade cycle: these countries could also have expected to suffer a further sharp deterioration in 1974 on account of higher oil prices.

  • Trade balances and reserves

    In 1972, the apparent f.o.b.–c.i.f. trade balance of developing countries as a group showed a $3 billion surplus, the first since the Korean war. Developments in 1973 increased this surplus to about $11 billion, the increase being entirely due to petroleum exporting countries, whose combined surplus expanded from $12.5 billion in 1972 to more than $21 billion. The combined deficit of developing countries not exporting petroleum, which had been reduced by about $2 billion in 1972, increased again by more than $1 billion in 1973 to nearly $10 billion.

  • International trade policy

    In 1973 and 1974 major negotiations took place under GATT Article XXIV (6), for compensation due to third parties, following the unbinding of UK tariff items consequent upon adoption of the EEC's common Customs tariff and common agricultural policy. With most of the negotiations under this head brought to a conclusion by the middle of 1974, and new arrangements for international trade in textiles having entered into force at the beginning of that year, the way was almost clear for another "round" of bargaining for a global liberalization of international trade under GATT. The formal inauguration of the current round, marked by a Ministerial Declaration, had already taken place in Tokyo in September 1973, but its substantive engagement had been repeatedly stalled by delays to passage by Congress of the Trade Bill giving the US Administration the necessary powers, both in this matter and over implementation of the US scheme of generalized preferences.

  • Commonwealth trading partners

    As shown in Table VIII, Commonwealth countries in the aggregate provided each other in 1973 with markets for 20 per cent of their exports—down a single percentage point, in round numbers, from the previous year. The share of the United States in total Commonwealth exports dropped 2 percentage points, to 29 per cent, though remaining by far the largest single country market. The balancing increases in share were recorded by the EEC (Eight) and Japan, the latter's share having gone up at an astonishingly rapid pace to reach 9 per cent in 1973, from only 6 per cent in 1971.

  • Intra-Commonwealth trade

    The relative magnitudes of some of the main categories in intra-Commonwealth trade are shown in Table IX. As will be seen from Appendix Tables 3, 5 and 7, the proportion of Commonwealth countries' total exports sent to Britain, the porportion of Commonwealth countries' total imports supplied by Britain, and the proportion of British imports supplied by Commonwealth countries, have all been falling. The processes of causation are complex, but an important part of the explanation lies in regional trade polarities in Europe, in the Pacific (Australia and New Zealand vis-a-vis Japan), and in North America—where sectoral arrangements covering trade between Canada and the United States in the fields of energy, defence procurement and automotive engineering have tended to detract from the influence of earlier, historic ties.

  • European Economic Community

    The first moves to integrate Britain into the tariff system of the EEC were made in 1973. For industrial goods, the six original members and three new ones began a progressive elimination of duties on imports from each other on 1 April 1973, when a 20 per cent cut was made. A similar cut was made on 1 January 1974, making a cumulative reduction of 40 per cent, and at the same time the new members made the first move in aligning their national tariffs on industrial goods to the common customs tariff (CCT) of the EEC.

  • United States

    Accounting for 14 per cent of world trade (Table I), the importance of the United States as a market for exports and a source of imports for selected Commonwealth countries is shown in Tables XVIII and XIX. The growing proportions of exports from Nigeria and Trinidad and Tobago shipped to the United States are attributable to higher volumes and prices of petroleum, while the lower share of Indian imports derived from that source, comparing 1972 and 1973 with 1969 and 1970, is due to a drop-off in food aid shipments.

  • Japan

    The changing Japanese shares in world trade, reaching something over 7 per cent for both exports and imports in 1973, are included in Table I: Tables XXII and XXIII show the rapidly growing importance of Japan both as a market for exports and as a source of supply for Australia and New Zealand. India and Nigeria have also in recent years been able to take advantage of the high growth rate of the Japanese economy, its heavy dependence on imported raw materials and its competitiveness as a source of manufactures. This complementarity has been materially augmented by elements of bilateralism in Japanese trade strategy, and by the felt need for diversification of markets and sources on the part of some Commonwealth countries.

  • Eastern Europe

    The growing importance of Eastern European countries as markets for the produce of Cyprus, Ghana and Guyana, and their continuing importance for India, are brought out in Table XXVI. Equally striking, in Table XXVII, is the declining extent to which Eastern European goods contributed to the import totals of India and Sri Lanka over the period 1969 to 1973.

  • China

    Higher exports from Canada to China in 1973 were largely attributable to a rise in grain shipments. Indeed, for the period 1971–1973, that Commonwealth country supplied most of China's import requirements of wheat. Australia obtained a contract to supply, in 1973, a million tons of wheat.

  • Appendices and Notes on Statistics
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