World Trade Picture Bright, GATT Says

The volume of worldwide trade in goods grew by 5% last year and is expected to rise by the same percentage in 1988, according to a new study by the General Agreement on Tariffs and Trade.

The study by the international trading body paints a more upbeat picture of the world economy than one issued in February that estimated 4% growth in 1987 and 1988.

Five consecutive years of growth have brought the volume of world trade one-quarter above that in 1982, a recession year, the study said.

Trade in manufactured goods led the expansion with an estimated 5.5% increase in growth, exceeding the average annual increase so far this decade, the study said.

The report said agricultural trade volume “turned in the best performance since 1981,” with 4.5% growth, contrasted with a 1% decline in 1986. The previous prediction was 4%.

However, world agricultural output declined for the first time since 1950, by an estimated 3%, largely because of high levels of world stocks for major agricultural products, the report said.

Strongest Force Cited

The report also said that “the pickup in many agricultural prices since the beginning of 1987 has done nothing to reduce the urgent need for major reform in trade-related agricultural policies” which include trade-distorting measures such as subsidies and market restrictions.

Imports by industrialized countries remained the strongest force in world trade expansion, though growth slowed to 6% from 8.5% in 1986, the report said.

The volume of imports by developing countries increased by 3% last year after declining 5% in 1986, the report said. Growth in those countries’ exports dropped to 6% from 9%.

For 15 heavily indebted developing countries, merchandise exports in 1987 rebounded after dropping 15% in 1986, the report said. It traced the recovery to firmer oil and metals prices, and to increased manufactured exports.

Imports by those countries--Argentina, Bolivia, Brazil, Chile, Colombia, Ivory Coast, Ecuador, Mexico, Morocco, Nigeria, Peru, the Philippines, Uruguay, Venezuela, and Yugoslavia--rose by 7% last year after stagnating from 1984 to 1986.

The report, noting the stock market plunge last October, said “the most striking feature of the world economy in the past 12 months has been its unexpected resiliency.” It said positive elements of the world economy currently outweigh negative factors.

Positive factors cited were the relative stability of exchange rates of major currencies since last December and “indications that the merchandise trade imbalances of the United States and Japan are beginning to decline.”

Another positive element is continuing, though modest, progress in dealing with Third World debt, it said.

However, it said, questions remain as to how soon such problems can be resolved, casting “a cloud of uncertainty over the outlook for the world economy.”

It also warned of a possible resurgence of inflation and protectionist pressures.