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April 17, 1974
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Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Secret Economic Intelligence Weekly Secret CIA No. 8030/74 17 April 1974 Copy N2 161 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150017-8 SFIGRIs'f Pa ,c vlest Germany's Remarkable Trade Record Striking export growth generated a record surplus last year. 1 Second Trans-Sib Line to Move Oil? The USSR recently proposed that Japan help finance a second trans-Siberian railroad instead of an oil pipeline. Canada: Tough Policy Proposed for Raw Material Exports Ottawa's proposed :egislation would res,;?ict exports of nonfood raw materials. 6 concerned about capital outflows from Italy and France. 7 Growing Uncertainty in Exchange Markets Central bankers are Chile: High Copper Prices Buoy the Economy Chile's economic prospects have been improved by the recent jump in world copper prices. Tel Aviv to Ride Out Economic Difficulties Substantial foreign exchange reserves and generous US aid should enable Israel to live with an expansionary policy. UN Speccal Session on Raw Materials The LDCs will air their usual grievances against the industrial nutions. 11 Latin America: Banana Producers' Union Slipping Government plans to boost earnings through an export tax on bananas are not progressing smoothly. Argentine )rn Exr arts Moving at Rapid Pace Drought in Eastern Europe Reaction to US-Saudi Announcement EC-Syria: Assad Seeks Formal Ties with the Community Paris Reports Trade Deficit Comparative Indicators Recent Data Concerning Internal and External Economic Activity The oil situation is now being covered mainly in I 14 14 14 14 15 Note: ublication are welcomed. They may be directed to Mrs. SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 SECRE';' ECONOMIC INTELLIGENCE WEEKLY Articles WEST GERMANY'S REMARKABLE TRADE hECORD West Germany continues to rack up record trade surpluses despite the repeated revaluation of its currency, an increasing oil bill, and the faltering economies of its major trading partners. The surplus hit a new monthly high of $1.8 billion (on an f.o.b./c.i.f. basis, not seasonally adjusted) in February, following a $1.2 billion surplus in January. The surplus in 1973 totaled 12.7 billion - in itself remarkable. This record surplus arose mainly from West Germany's dynamic export performance. The following were the main factors in the str;.king 18% gain in export volume and 46% gain in export value in dollars last year: ? Surging world demand for capital goods, consumer durables, and intermediate materials especially benefited German export industries, which are renowned for timely delivery of high-quality products. ? Stagnating domestic demand, caused partly by restrictive monetary rind fiscal policies, increased the export capability of Genna:a industry. ? Tight money directly induced German producers to empha- size exports because payments sometimes could be obtained more quickly than on domestic sales. ? Producers of goods in short supply abroad-notably auto- mobiles, and steel products-were able to raise dollar prices by more than the mark's revaluation. ? Prices of other exports generally remained competitive because West Germany had a lower inflation rate than most of its customers and many firms cut profit margins on foreign sales. As a result, the average price of German exports in mark terms rose only 2% from 1972, and the increase in average prices in terms of dollars did not materially exceed the 21% appreciation of the mark against the dollar. SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 SECRET Iron and steel products led West Germany's export boom with a 72% rise in sales. Market conditions permitted substantial price hikes while volume grew by 33%. Earnings from agricultural products, a relatively minor export, jumped 65% in 1973 with the aid of skyrocketing world prices. Sales growth ranged from 42% to 47% for such important Getman manufactures as automobiles, electrical machinery, machine tools, and chemicals. Except for chemicals, increases in volume typically amounted to 10%-20%, and price increases were still larger. The chemical industry, more than most, shaved prices to push up export volume. The revaluation of the mark against the dollar caused exports to the United States, Canada, and Latin America to grow more slowly than those to other regions. At the same time, imports from the United States and Canada grew faster than sales to them, in marked contrast to German trade trends elsewhere. The growth of sales volume to the United States fell off markedly for some commodities. Automobile deliveries, for example, rose by only 4%, although price hikes boosted earnings substantially. Trends in West German Export and Import Prices J F M 60.1091 4.74 A M J J A S 0 1973 SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150017-8 SECRET Growth in West German Trade, by Area 1973 Percent Charge in Dollar Value: Trading Partner Exports (f.o.b.) Imports (c.i.f.) Total 46 37 Other EC countries 47 33 Other Western Europe 42 39 United States 33 37 Canada 22 40 Communist countries '13 53 Japan 72 38 LDCs 47 44 Of which: Near East and African oil producers 58 55 Latin America 33 28 Factors in West German Export Growth 1973 Absolute Incr P t Percent Increase ease (Million US $) ercen Increase Volume Prices (US $) Total exports Of which: 21,268 46 18 24 Iron and steel products 1,565 72 33 29 Agricultural products 1,196 65 16 42 Transportation equipment Of which: 3,427 42 14 24 Automobiles 1,579 42 11 28 Electrical machinery 2,049 46 20 22- Non-electrical machinery Of which: 3,804 38 13 22 Machine tools 632 42 11 25 Chemicals 1,621 47 35 9 3 SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 SECRET Parity changes relative to other currencies had little or no adverse effect on German trade performance. Japan, Communist countries, and Arab oil-producing nations were by far the fastest growing export markets. Increased demand and capacity constraints in other West European countries helped to boost the German trade surplus with that area. Extraordinary circumstances contributed to the jump in the trade surplus early this year. Industrial strikes in Italy and a three-day workweek in the United Kingdom severely delayed imports from these key suppliers and diverted customer orders to West German industry. Release of chemicals and other materials, which had been withheld by German traders during the Arab oil cutback in anticipation of price rises, also boosted German sales. As a result, exports rose 45% in January-February compared with the first two months of 1973; imports increased by 26% entirely because of sharply higher prices. Import volume actually declined by an estimated 10% or so, while export volume rose by about 15%. As these special factors fade, the trade surplus is expected to narrow-totaling perhaps $10 billion to $11 billion for 1974 as a whole. Much higher prices, particularly for oil, will push import payments up considerably even though slow domestic growth will keep demand depressed. Export growth probably will be down appreciably from last year's rapid pace. Automobile sales, particularly to other European countries, are down sharply, and growth in orders for other export goods also has begun to decline. Export prices in dollar terms are likely to rise somewhat less than last year, higher quotations in marks being partly offset by smaller appreciation of the mark. Producers already have begun to raise export prices in marks to reflect spiraling material and labor costs. Where profit margins have been :-ueezed severely by previous efforts to hold down prices, exporters will have little choice out to pass on additional cost rises to their customers. SECOND TRANS-SIB LINE TO MOVE OIL? Brezhnev and Kosygin recently proposed that the Japanese help finance a second trans-Siberian rail line instead of a pipeline to transport Tyumen' oil to the Pacific Coast. Tokyo is reluctant because a rail line would take longer to construct, cost more, and anger the Chinese. Whether the oil goes by pipeline or rail, Japan considers US participation essential as insurance against interruptions in deliveries and as a shield against Chinese retaliation. Regardless of Japan's decision, the Soviets probably will go ahead with the project. 4 SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85TOO875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 SECRET Under the new proposal the Soviets would supply Japan with 25 million tons (500,000 b/d) of crude oil annually for 20 years following the line's completion. In return, the USSR wants up to $3 billion in loans for construction and railway equipment, rails, and equipment to improve Soviet pipelines. The second trans-Siberian railroad - extending 2,000 miles from north of Lake Baikal to Komsomol'sk -- would run 100 to 500 miles north of the existing !ine. The proposal resurrects an old Stalin scheme that has brought intermittent construction over the years. Segments on the eastern and western ends are now in operation. Because of the extremely difficult terrain and weather, the suggested completion date of 1981 seems implausible. Railroads in the Eastern USSR Niumk , i e oY~nk ../~ 111' Kul Tnhet Lake Baikal 1 t,'t ?*Abeken Chelemkhoro yl ~ Chiles\~ r,.ul.Aj U4n.Ud. . //,.~ 0ukirt. ~Nomaamo' HIik a$Wn 1 Chepdai n??LL- i ;~n Nluhn ?Oeloeor,41 L k ;SeM~ll Not h i(o i South Ket66 Japan tanro~,, The proposed line would provide access to important deposits of coal, copper, iron ore, and gold, as well as Tyumen' oil. It also would make possible the development of new industrial centers and agricultural areas. In addition, the new line would be less vulnerable than the existing line, which passes within ten miles of the Chinese border at some points. Since the Japanese prefer a pipeline, the newest Soviet proposal is likely to complicate negotiations on the Tyumen' project. The Japanese object to the extra time and cost of construction and suspect, probably correctly, that the Soviets would not wish to burden the rail line with as much as 25 million tons of oil per year. Whereas the pipeline would be wholly dedicated to oil transport, the rail line would have many SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 SECRET. alternative uses for Moscow. US participation is desired for political as much as economic reasons. Indeed, the rail line, unlike the pipeline, can readily be built without US or Japanese know-how. CANADA: TOUGH POLICY PROPOSED FOR RAW MATERIAL EXPORTS Ottawa has pr;)t,osed legislation empowering the federal government to selectively restrict exports of nonfood raw materials. The legislation would put more muscle behind efforts to encourage greater processing of raw materials before they are exported. It also would strengthen Ottawa's hand in controlling raw material exports authorized by the provincial governments. Minister of Trade Gillespie estimates that the legislation would help generate as much as $5 billion in new investment in processing facilities over the next several years. The legislation would particuiariy affect the United States and Japan. US purchases of crude materials - mainly petroleum, natural gas, and iron ore - amounted to $2.7 billion last year, 55% of Canada's total exports of such goods. Japan imports nearly a billion dollars worth of Canadian raw materials, such as metal ores, coal, and logs. Canadian Nonfood Exports, 1973 Million US $ Crude Materials Intermediate Products Final Products Total Total 5,007 8,187 8,260 21,454 United States 2,735 5,695 7,158 15,587 Japan 981 363 31 1,376 United Kingdom 311 769 160 1,241 West Germany 165 169 63 397 Other countries 814 1,191 847 2,853 6 SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-tRDP85T00875R001500150017-8 SECRET In the upcoming multilateral trade negotiations, Canada almost certainly will seek greater access for its processed materials to markets in other countries. Minister of Energy MacDonald recently stated that Canada might be willing to associate with the less developed countries in demanding improved access to markets and in extracting higher prices for raw materials. * * ?3ir d(. GROWING UNCERTAINTY IN EXCHANGE MARKETS Central bankers are increasingly uneasy about international market prospects, concern t fiat growing political and economic uncertainties in Italy and France will bring massive speculative outflows of capital from these countries. Such outflows would complicate the market's task of recycling surplus oil-producer revenue to consuming countries. The optimism expressed by Bank of Italy officials that Italian capital outflows can be controlled was not shared by the other bankers. Administrative measures aimed at curbing these outflows have not been effective in the past. In addition, the central bankers feel that Rome will have to end its costly defense of the lira, even though a decline in its value probably would provoke further speculative outflows of funds. The Bank of Italy has used the proceeds of the recent massive Eurodollar loans to support the lira. Its market intervention in the first quarter cost about $3 billion, or twice the present foreign exchange reserves. Because indebtedness now exceeds $10 billion, Italy will find further borrowing more difficult and expensive. The franc is much stronger than the lira beca,-.,c of France's healthy balance of payment.:. At the same time, it is than the mark and vulnerable to speculative capital movements. The central bankers apparently believe that fears of an election victory by Socialist candidate Francois Mitterrand could lead to sizable capital movements from France. Similar fears during the last presidential election intensified market pressure on the franc. Investors already are seeking safer havens for their funds before new capital controls can be imposed; large capital outflows to London and Switzerland have been reported. If the outflow continues, Paris will have to accept a weaker franc, at least temporarily, or commit some of its foreign reserves to support the currency. SECT ET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 SECRET CHILE: HIGH COPPER PRICES BUOY THE ECONOMY Chile's economic prospects have been improved by the recent jump in world copper prices. With the added copper earnings and resulting improvement in its cradit rating, Chile is not seriously handicapped at prevent by lack of foreign exchange. If copper prices fall sharply later this year, the government's ability to deal with the mess inherited from Allende will be weakened, especially next year. Copper prices are now hovering near $1.25 per pound, up from $0.88 in September 1973. Prices will continue strong for several months at least, because consumers still are rebuilding stocks and speculators are hedging against a possible US copper strike this summer. Copper production in 1974 is expected to reach 850,000 tons, 15% more than last year. Better worker discipline and the renovation of mines, smelters, and refineries damaged vndtr the Allende government are boosting output. If copper prices average out at $1.00 per pound this year, copper exports w;:' reach about $1.6 billion and total exports $1.9 billion. Imports are projected at $2.1 billion, up 40% from 1973 because of increased petroleum prices and rising agricultural imports. The resulting $200 million trade deficit would be the smallest since 1971. Prospects for obtaining credits in 1974 to cover imports of agricultural commodities and capital goods have improved. A recent Paris Club a&--cement rolling over $490 million of the debt repayments due this year greatly eased the strain on Chile's weak reserve position. Santiago now will pay only about $175 million to major Western creditors. About $100 million owed other creditors, largely Communist nations and international institu- tions, has not yet been renegotiated. Proceeds from foreign borrowing and investment are expected to exceed debt. payments and other capital outflows. Chile's balance-of-payments deficit in 1974 is expected to be only $125 million, one-half of last year's. During January-March, the cost of living soared by about 62%, largely as a result of successive currency devaluations and high prices for imported petroleum and agricultural commodities. These factors plus a wage hike in the next month or so to restore some of the eroded purchasing power will continue pushing prices up. The junta now merely hopes to keep the increase in the cost of living below 200%, and even this goal is unlikely to be met. Led by increased mineral output, GDP probably will grow by 5% to 7% in real terms during 1974, compared with a 6% drop- last year. Although 8 SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 SECRET CHILE: Avt.Ma~ - op[.,2~J ?r . on the Lond~:' ianva US Cents per pound 140 I ...._ CHILE: Copper Production 1973 1974 atiel.dwl SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 SI?,(11RE'I' industrial output surged for- ward in the month following the coup, a drop in effective demand is causing output to slide. Agricultural production will remain depressed this year because most crops were planted before the coup, and large food imports will be needed to supplement poor harvests. In the hope that re?? newed foreign investment will stimulate the economy, the junta is pushing completion of a liberalized investment code. CHILE: International Trade Million US $ Import' c Deficit Expor,s f.o.b. 1070 1011 1012 1P73 1974 (Pro(eored) 563090 CUM TEL AVIV TO RIDE OUT ECONOMIC DIFFICULTIES The weakened Israeli labor government, rather than risk recession, has adopted expansionary policies. The higher import bill and increased aid requirements stemming from these policies can be covered adequately by Israel's substantial foreign exchange reserves and the US aid already scheduled. Economic recovery from the war has occurred faster than forecast. Demobilization on the Egyptian front has been rapid. Industrial production and construction are reviving, although they are not yet back to normal levels. Real growth of GNP in 1974 probably will reach 5% to 7%. Personal consumption should equal the 1973 level rather than fall by 10% as originally forecast. The -ate of inflation will be high, perhaps 40% for the year. Since the cease-fire and the indecisive December elections, the government has yielded to pressures to give the man in the street some relief from the compulsory savings, additional taxes, and reduced SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 1 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150017-8 SI',C1z1s'I' consumption necessitated by the war. Following an inflation rate of 27'/, in 1973, consumer prices jumped 121/, in Jairuary and February, partly because of higher prices for imports -- particularly petroleum. Prices of certain food items rose 50`7(,70% as government subsidies were reduced. The government has moved to give some relief' from the higher prices and to encourage business expansion. Cost-of-living allowances and welfare benefits were raised recently. Government loans to investors are being offered at low interest rates. The long-discussed value added tax is not being implemented. The budget for FY 1974 is expansionary. Expenditures of $8.5 billion are 10% above the estimated 1973 level. Defense outlays claim 40% of the budget, half for foreign arms and the remainder for local procurement, salaries, and construction. On the civilian side, large increases are planned for immigrant housing and welfare benefits. Although budget revenues fall well short of' expenditures, the compulsory war loan of 7'/, of taxable income is not being continued; only the voluntary loan will remain in effect. The remaining deficit will be offset largely by US aid for both military and civilian purposes. The projected 4070 rate of inflation will not seriously hurt the trade balance, since exports are extensively subsidized. Two-thirds of Israel's crude oil imports can be offset with petroleum exports made possible by the continuing use of Sinai oil. The good agricultural harvest expected in 1974 will hold down grain imports. Israel faces no immediate foreign exchange problems despite a current account deficit of ot,~ and one-half times the pre-war level. The forecast deficit of more than $2.f billion for 1974 shout.; be offset by transfer;, on capital account and at least $1 billion in US assistance. In addition, foreign exchange raised from World Jewry can be drawn on if the trade balance deteriorates, and Tel Aviv can if necessary draw on official reserves of about $1.8 billion. UN SPECIAL SESSION ON RAW MATERIALS Algerian President Boumedienne, sponsor and first speaker at the UN Special Session on raw materials and development.. immediately tried last week to politicize the issues. He called for a strengthening of relationships among the "non-aligned" countries and cited recent oil developments as proof of the developing countries' ability to shift the balance of economic power in their favor. The developed countries, including the USSR, have sought to emphasize cooperation between consuming and producing nations, rather than confrontation. SECRET Approved 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 SI1;(:F:Is'I' 'Cite UN Session, still under way in New York, is the developing nations' answer to the Washington Conference of oil-consuming countries. The LUCs will dust off most of the economic harangues that are standard fare at UNCTAD and other internationa: economic forums. They are expected to focus most sharply on the issues of market access and adequate prices for their products. ? The LDCs will again ask the developed countries io facilitate LDC exports by eliminating tariffs and taxes on such goods, dropping price supports on production of primary products, and allocating a share of their markets to the LDCs. ? The LDCs will ask that prices of their goods be raised to "remunerative levels" and then linked to prices of their iniports. They also will demand international financing to compensate for price levels considered non-remunerative. ? The meeting will discuss the implications of higher oil prices for the poorer LDCs and call for action on high prices and shortages of food supplies. The sassion probably will not bring any new solutions. Instead, it will serve as a forum for airing LDC grievances against the industrial nations and will dramatize again the differences between them. It may also reveal deep divisions among the LDCs. Various groups of producing and consuming countries will continue after the conference to pursue their own approaches to the raw materials problem. Producers of some commodities will by to promote cooperative efforts to force up prices. Other countries may take unilateral action to earn more from their commodity exports; Canada, for example, is thinking of restricting the sale of raw materials in crude form. Consuming countries can be w.pected to explore further the value of bilateral deals or international cooperation in assuring raw material supplies and avoiding sudden jumps in prices. LATIN AMERICA: BANANA PRODUCERS' UNION SLIPPING The plans of seven Central and South American banana producing countries to raise their revenues through an export tax are not progressing smoothly. Colombia, Costa Rica, Ecuador, Guatemala, Honduras, Nicaragua, and Panama, which account for 80'/0 of world banana exports, last month organized a Union of Banana Exporting Countries (UPEB) along OPEC lines. SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150017-8 SII,C1zE-I' They quickly agreed in principle to introduce a bananvi export tax that could boost US retail prices by 25%. The three US-owned companies that market the area's bananas and control most Central American production strongly oppose the tax and may be able to derail it. The UPEB members are not supporting the tax uniformly. ? Costa Rica, Honduras, Nit.?-ragua, and Panama, anxious to offset increased oil costs, levied a tax of 2-1/2? per pound effective this month. ? Guatemala and Colombia apparently are wavering on the tax rate and have not set effective dates. ? Oil-producing Ecuador is considering only a 10 tax and is delaying imposing it. The marketing companies are using their considerable economic leverage to exploit UPEB's lack of solidarity. They are playing one country against another and using delaying tactics. Arguing that higher prices will cut sales vclume 50% - not 10%-12% as UPEB estimates - they threaten to cut production drastically in Honduras and Panama while favoring Ecuador, the largest producer, and Costa Rica. In Panama, which imposed the tax on 1 April, one company is simply not paying it. Aided by producer disunity, the companies' tactics probably will cause the scheme to collapse. Ecuador - and perhaps Colombia - may not impose the tax at all if they believe sales volumes are likely to drop. If Ecuador fails to participate, the tax's demise will be hastened. In Honduras, heavily dependent on bananas for export earnings, some high-ranking government officials oppose the tax. Since neither Honduras nor Panama can withstand prolonged losses of bananas export earnings. they are unlikely to support the tax for long. SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150017-8 S1',C;R13'1' Notes Argentine Corn Exports Moving at Rapid Pace Argentina's bumper corn harvest of 9.6 million to 10.2 million tons may yield an exportable surplus of about 6 million tons - 25% more than last year. Expos is in the first quarter of some 500,000 tons, mostly to Europe, were 1181/0 higher than in the first quarter of 1973. Larger exports this year from South Africa as well as Argentina have contributed to the recent det-linc, in orn prices and eased pressure on US supplies. Drought in Eastern Europe Drought threatens East European crops, especially winter wheat in Bulgaria, Romania, and Hungary. At the end of March, soil moisture was 13% to 45% below normal. Unless rainfall returns to normal in April and May, sharply reduced yields of winter grain and forage crops can be expected. Rain is also needed urgently for germination and early development of spring-planted crops. If the drought continues, East European grain imports next year could be well above the 8.1 million tons estimated for FY 1974. Romania - normally a grain exporter - already has asked for CCC credit to cover the purchase of one million tons of US grain in FY 1975. Reaction to US-Saudi Announcement Foreign reaction to the 5 April announcement of US-Sludi cooperation in economics, 'technology, industry, and defense so far has been mild and positive. The agreement generally is seen as a stabilizing influence in the Middle East that does not conflict with the interests of other Western powers. Despite US claims that the agreement does not constitute an oil-for- industrialization bilateral deal, Paris has inferred that the United States should no longer object to French pursuit of bilateral arrangements. Other governments probably take the same view. The agreement produced practically no reaction in Japan; editorial comment has been absent and some newspapers ignored the story completely. Saudi reaction in government and business circles has been unanimously enthusiastic. EC-Syria: Assad Seeks Forma! Ties with the Community Syria is pushing for immediate negotiations on economic cooperation with the EC. In a recent co;-.Terence with EC Commissioner Cheysson in Damascus, the Syrians spelled out their interest in obtaining EC market SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875R001500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 SECRET preferences and cooperation in technical, scientific, indli'strial, and financial matters. These initiatives represent a change in Assad's former lukewarm attitude toward the EC and may reflect his desire to balance off the heavy Soviet economic presence in the country. Syria has struck a number of bilateral deals with the East since the last large Soviet credit agreement in 1972. Now that Arab states have granted Syria considerable financial aid, Assad may be interested in negotiating additional multilateral development projects. A long list of possible projects was offered to the EC official. Paris Reports Trade Deficit French trade in the first quarter of 1974 fell into deficit by $684 million, compared with a $280 million surplus for the same period a year earlier. The turnaround was primarily caused by a near tripling of oil prices, which raised the deficit in oil trade by about $800 million. France's position on non-oil trade also has been deteriorating. By March, this trade was roughly in balance. SECRET 17 April 1974 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 GNP" Constant Markel Pricus United States Japan West Gur,nlany Franca United Kingdom Italy Canada United States Japan West Germany France United Kingdom Italy Canada RETAIL SALES" Current Prices United States Japan West Germany France United Kingdom Italy Canada Lnited States J,ipan West Germany France United Kingdom Canada Euro?Dollars 17 April 1974 Office of Economic Research/CIA Percent Clurop Lolest Irons Previous Quarter Quarter 73 IV 73 IV 73 IV 73 111 73 111 73 1 73 IV Percent Change Latest from Previous Month Month Mar 74 Nov 73 Dec 73 Nov 73 Nov 73 Aug 73 Jan 74 0.4 1.4 - 0.1 0.9 1.3 0.8 2.0 2.0 3.4 0.5 -2.4 0.7 6.7 2.9 INTERNAL ECONOMIC INDICATORS 1971) 4.7 8.3 3.1 5.6 3.9 3.1 6.1 Percent Change Latest Iran Previous Month Month 1970 Mar 74 -0.4 4.4 Feb 74 -0.5 8.2 Jan 74 -0.6 3.2 Jan 74 4.6 7.0 Jan 74 - 6.7 0.1 Jon 74 3.6 5.4 Jan 74 1.1 6.5 1970 10.5 14.6 7.8 5.6 12.1 12.4 11.2 Representative Rates Prime finance paper Call money Interbank loans(3Months) Call money Local authority deposits Finance paper Three-month deposits Average Annul; Growth Hem Since I Year Earlier 4.0 7.0 3.4 0.1 0.0 5.2 7.2 Average Annual Growth Rate Since I Year Earlier 0 8.7 0.0 4.6 -7.0 19.7 5.5 Average Annual Growth Rate Since I Year Earlier 4.8 27.4 5.8 15.2 148 19.0 12.P 29 Mar 15 Mar 29 Mar 22 Mar 29 Mar 29 Mar 29 Me- Previous Quarter 1.5 5.8 - 0.3 3.8 5.2 3.4 11.6 3 Months Earlier" -7.9 -2,n -4.3 3.4 -17.7 24.6 11.9 3 Months Earlier" 5.5 32.0 7.'. 2t:.1 21.9 5.0 15.9 8.00 12.50 11.38 11.88 6.00 9.f. d 10.00 I Year Earlier 6.63 5.50 NA. 7.25 7.32 5.13 8.63 WHOLESALE PRICES Industrial United States Japan West Germany Franro United Kingdom Italy Canada United States Japan West Germany France United Kingdom Italy Canada United States Japan West Germany France United Kingdom Italy Canada 3 Mor'is Earl r B.t.1 12.00 13.00 NA. 16.91 9.50 10.13 1 Month Earlier 7.25 12.00 10.38 12.75 14.63 8.50 8.88 Percent t,hange Latest from Previous Mc-th Month Percent Changa Latest Ifni" Pravwus I Year Month Merrill 1970 Earlier Mar 74 2.9 8.1 19.0 Felt 74 3.9 11.3 37.0 Jan 74 2.7 5.9 10.0 Fob 74 3.5 11.6 29.5 Mar74 3.1 10.0 18.7 Nov 73 1.0 9.0 21.1 Jan 74 3.3 0.4 19.8 Mar 74 Jec 73 Jan 74 Jan 14 For, 74 Oil 73 Feb 74 0.9 0 0.1 1.1 -0.5 1.6 0 1970 7.4 17.5 8.9 13.2 9.0 20.7 13.0 Average Annual Growth Rate Sinra Average Annual Growth Rate Since Percent Clmngo Latest from Previous I Year Month Month I170 Earlier Feb 74 1.3 6.0 10.1 Feb 74 3.4 11.0 26.3 Jan 74 0.7 6.2 7.4 Feb 74 1.3 7.3 11.5 Feb 74 1.7 9.5 13.2 Dec 73 1.4 7.7 12.5 Feb 74 1.0 5.8 96 Average Annual Growth Role Since I Year Earlier 7.1 16.7 0.6 12.3 3.6 23.0 11.8 'Sansonldly adjusted. "Average for latest 3 months aomparad Yvkch varogs for pravlous 3 months. 3 Months Earlier 30.7 89.7 20.5 62.6 41.3 17.5 27.8 3 Months Earlier 12.1 56.3 11.8 15.6 19.0 14.5 9.9 3 Months Earlier 7.4 14.7 9.8 18.7 0.2 21.4 13.3 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8 lo.er_ United Status Japan West Germany Franco United Kingdom Italy Canada United States Japan West Germany France United Kingdom Italy Canada TRADE BALANCE" f.o.b./f.o.b. United States Japan West Germany France United Kingdom Italy EXTERNAL ECONOMIC INDICATORS Million US $ Million US$ 1974 1873 Fob 74 7,010 14,720 10,042 Fob 74 3,031 7,204 5,405 Fob 74 0,527 13,541 9,324 Mar71 3,071 10,542 7,913 Fah 74 2,616 4,871 4,259 Jan 74 1,906 1,960 1,494 Fob 74 2,458 4,902 3,941 Million US $ rob 74 7,390 Fob 74 4,085 Fob 74 4,376 Mar74 3,953 Fob 74 3,592 Jan 74 2,170 Fob 74 2,507 Percent C;mnlu 40.0 33.3 45.2 33.2 14.4 31.6 24.4 Million US S Porconl 1974 1973 Chango 13,860 10,822 I 28.1 7,559 3,810 98.4 9,363 7,4491 25.7 11,220 7,633 47.1 C,1Cf 4,630 44.1 2,170 I 1,481 46,G 4,733 3,63? 30.1 Million US S Fob 74 220 Fob 74 -453 Feb 74 2,151 Mar74 -282 Fob 74 -976 Jan74 -205 Fob 74 -49 1974 860 -275 4,178 -684 1,828 -205 169 1973 -780 1 655 1,875 280 -371 0 304 Change 1,640 -1,931 2,303 - 964 -1.457 -212 -135 BASIC BALANCE" Currant and Long ?Term?Capital Transactions latest Period Cumulative (Million US $I United States' Japan West Germany France United Kingdom Italy Canada 73 IV Feb 14 Feb 74 73 IV 73 III 72 IV 73 III Million US $ 1973 1972 200 1,186 -9,838 -1,690 -9,/02 2,137 1,161 3,950 4,566 -352 -2,391 -369 - 521 -1,840 -1,252 800 N.A. 2,983 238 267 574 United States Japan West Germany France United Kingdom Italy Canada End of Billion US S Jun 1970 Feb 74 14.6 18.3 Mar 74 12.4 4.1 Fob 74 32.0 8.8 Mar 74 8.1 4.4 Mar 74 8.4 2.8 Fob 74 5.4 4.7 Mar 74 8.1 4.3 'Seasonally adjusted. "Converted Into US dollars a! current market rates of exchange. 17 April 1974 Change 11,024 -11,839 -616 -2,022 - 587 N.A. -308 3 Months Earlier 14.4 12.2 34.1 8.5 8.5 6.1 5.8 United States Japan West Germany France United Kingdom Italy Canada EXPGRT PRICES National Currency United States Japan West Get many France United K.,.,,rtom Italy Canada IMPORT PRICES National Currency United States Japan West Germany France United Kingdom Italy Canada Percent Chango Latest from Previous Month Month Jan 74 I 0.6 I Percent Chang6 Latest Irc:,l Praviuus Montt, Month Average Atli let Grewln Role S;'co I Year Earlier 26.C 27.4 21.8 31.9 17.3 23.7 20.8 3 Months Earlier 27.5 11.6 -37.8 1 5.7 1 2.4 29.1 50.1 3 Months Earlier 27.5 34.1 14.5 34.9 33.4 17.3 44.8 Average Annual Growth Rate Since Percent Change Latest from Previous Month Merrill 1970 Jon 74 3.7 14.3 Nov 73 3.7 4.6 Jan 74 6.2 5.0 Oct 73 -1.5 5.3 Doc 73 5.2 16.4 Oct 73 3.4 14.0 Dec 73 24 6.3 EXCHANGE RATES Spot Bata As of 12 April 74 Japanlrerp West Germany Mark) France (Franc) 'Pound United Kingdom Sterling) Italy (Lira) Canada (Dollar) US S Per Unit 0.00381 0.39250 0.20350 2.36100 0.00157 1.02940 Dec 66 30.81 56.13 0.79 -15.39 - 1.81 11.60 1 Year 3 Months Earlier Ear lie 34.4 58.6 19.8 31 0 19.5 82.3 14.3 35.2 43.1 53.1 38.7 30.8 15.8 19.5 18 Dec 1971 11.15 26.49 3.35 - 9.39 - 8.60 3.17 19 Mar 1973 -5.10 10.84 -7.67 -4.06 -11.19 3.18 TRADE-WEIGHTED EXCHANGE RATES"*" As of 12 April 74 Percent Change from 5 Apr 1974 0.70 - 0.43 - 1.31 - 1.30 0.51 0.08 18 Dec 19 Mar 5 Apr Dec 66 1971 1913 1974 United States -16.79 -7.39 -0.73 0.14 Japan 19.32 5.46 -6.50 0.82 West Germany 33.34 16.23 11.19 - 0.01 France -21.36 -7.85 -10.29 - 0.90 United Kingdom -34.51 -20.29 -5.91 - 1.13 Italy -22.65 -21.32 -14.44 - 0.02 Canada 8.43 1.83 47 0.01 "Weighting is based on each listed country's trade with 18 other industrializod countries to reflect the competitive impact of exchange-rate variations among the major currencies. Approved For Release 2009/09/29: CIA-RDP85T00875RO01500150017-8