Trade problems main theme of U.S. talks

Press, 11 May 1984, Page 3

Trade problems main theme of U.S. talks

NZPA staff correspondent Washington The Prime Minister, Sir Robert Muldoon, arrives in Washington today for talks with ministers of other nations and officials from international organisations on the political problems of international trade.

The meeting has been convened by the United States Special Trade Representative, Mr Bill Brock, who has the title of “Ambassador” and deals purely with external trade.

Sir Robert is an exception, other countries have sent Trade Ministers.

A broad range of countries and groups are represented — the Common Market, France, Japan, Australia, Brazil, India, South Korea, the Philippines, Yugoslavia, Sweden, Canada, Mexico, the International Monetary Fund, and the General Agreement on Tariffs and Trade. Mr Brock insisted on high-level politicians, NZPA was told, and the 17 participants will hold their most important meetings without any aides present.

All talk will be behind closed doors, and the perspective will be highly political, sources said.

The meeting comes at a time of flux for the wellrepresented Third World countries whose plight is threatening to disrupt the developed world. The prices of the raw materials and commodities which form the basic exports for much of the Third World are finally starting to stage a comeback, though unevenly, with primary commodities other than oil rising 7 per cent last year after dropping 15 per cent in 1981 and 12 per cent in 1982, according to International Monetary Fund figures. Petroleum prices appear to have stabilised after two years of decline, giving countries such as Nigeria and Mexico the prospect of lower but more stable revenues, allowing them to plan further ahead, and the recovery in the developed world means the developing countries are starting to be able to export more of their products as well as getting

higher prices for most of them, economists say. This week, however, the leading American banks raised their prime rate, to which many of the huge Third World debts are tied, by half a percentage point to 12% per cent. With so many of the Third World countries deeply in debt, though, the analysts say, this will negate many of the benefits of their increasing sales and prices. Citibank economists earlier predicted a further 10 per cent to 15 per cent increase in commodity prices this year, though this estimate was disputed by many other analysts. Protectionism will be a central theme (the United States International Trade Commission starts a hearing today on a petition to impose countervailing and anti-dumping duties on New Zealand lamb exports to the United States, and in New York a court will start hearing a complaint by Australian producers on beef import levels), but as fellow politicians there is likely to be, behind closed doors, more sympathy for the electoral pressures each faces than is generally indicated in public pronouncements. The United States Administration, for example, has long been publicly harrying the Japanese and the Common Market countries over their agricultural protectionism and subsidised exports while at the same time restricting imports into the United States of steel, textiles, beef, cars, and even television sets to protect local industries.

The Federal Reserve Board, the autonomous body that decides the money supply, and therefore interest rates in the United States, has begun a quiet campaign to persuade banks to limit the amount of interest they charge Third World countries with debts ranging up to around SUS9O billion. Economists were expecting this week’s rise in the prime rate, even though a Presidential spokesman, Mr Larry Speakes, criticised it, saying the Administration was “disappointed” and that the money supply seemed to be at the “absolute bottom” of the board’s target range for money growth. The prime rate in March was 11 per cent, and economic growth in the first quarter of this year was at an annual rate of 8.3 per cent, well above the earlier Administration forecast for the year of 5 per cent.

The rise in the prime rate will affect New Zealand and other developed as well as developing countries in the rest of the world, tempting capital flows to the United States to take advantage of the high interest rates and the strong dollar. The focus of today’s meeting, though, is trade rather than finance, although the two are inextricably linked, and the president of the World Bank, Mr Tom Clausen, who recently visited New Zealand, agrees with Mr Martin Feldstein, who resigned this week as president of the Council of Economic Advisers, that programmes should encourage Third World countries to expand exports rather than service debts.

Austerity programmes now are starting to lead to food riots and death in the streets in developing countries.

This, obviously, leads to political instability, a point which Sir Robert has often mentioned and which is likely to be considered more closely at a meeting of politicians, like today’s, than, for example, in the meeting halls and corridors of the 1.M.F., with its tight mandate. The 1.M.F., meanwhile, is predicting that the United States will run its biggest current account deficit ever this year while Japan marks up a record surplus, leading to “renewed instability in exchange markets.” New Zealand is facing 'problems — tariff and non- . tariff — selling its primary produce all over the world.

Mr Brock is well aware, of these problems, and the difficulties caused to New Zealand when the United States unloads surplus dairy products in other countries (a subject the chairman of the Dairy Board, Mr Jim Graham, said recently that he expected Sir Robert to take up in Washington) and Mr Brock is regarded in the United States as, within reason, a “free-trader.” Questions of international agricultural trade, and perhaps ways of eventually getting umbrella coverage of trade in agricultural products under G.A.T.T., are likely to come up at the meeting, sources say, and the political bent of the meeting may allow for constructive ideas.

The underlying theme, though, according to these sources, has to be the linkage between developed and developing countries.