INDUSTRIAL COUNTRIES: SELECTED ECONOMIC DATA

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP85T00287R000501390001-5
• Release Decision: RIFPUB
• Original Classification: K
• Document Page Count: 19
• Document Creation Date: December 22, 2016
• Document Release Date: July 13, 2010
• Sequence Number: 1
• Content Type: REPORT

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Industrial Countries:
.Selected Economic Data
Eu2.rrt 83 - io (`-11
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Industrial Countries: ? The US share of the economic output of industrial countries fell sharply
Economic Power Shifts from 1950 through the early 1970s, and thereafter stabilized.
? The largest US loss occurred in the 1950s, reflecting mainly the recovery
of war-torn Europe and Japan. The momentum of this catchup lasted
well into the 1960s although the changes in relative GNP shares slowed
considerably.
? During the 1970s the US share changed little.
? The gains of the EC Nine came entirely in the 1950s; after that the
group's proportion declined slightly as the share of the United Kingdom
and West Germany fell somewhat.
? Japan's gains came during the 1960s when its economic growth pace
topped an extraordinary 10 percent a year. Japan's share increased
slightly in the 1970s as its economy continued to grow somewhat faster
than that of other industrial countries.
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Industrial Countries: Economic Power Shifts
Share of total industrial country GNP, in 1975 prices
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Industrial Countries: ? The US current account position relies heavily on service transactions.
Current Account
Balances, 1982 ? In recent years, the United States has had the largest trade deficit among
industrial countries but has achieved by far the largest surplus on the
service account.
? France, Italy, and the United Kingdom tend to follow the US pattern, al-
though oil exports helped Britain to achieve a trade surplus last year.
? Japan, West Germany, and Canada usually run trade surpluses and
service deficits.
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Current Account Balance of Industrial Countries, 1982
Trade Versus Services
Tradea
Services and private transfers
Total
United States Japan West Franceb United Italyh Canadab
Germany Kingdom
aBased on balance-of-payments definition.
h tatimated
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Industrial Countries: ? The most commonly used indicator of a country's balance-of-payments
Current Account position is its balance on current transactions. This includes exports and
Trends imports of merchandise, trade in services, return on capital invested
abroad, and salaries earned abroad.
? The United States and other industrial countries, as a group, usually run
current account surpluses. These surpluses create the capital flows the
LDCs need to finance development efforts. By the early 1970s the
industrial country surpluses reached some $15 billion a year. This normal
surplus situation was distorted after 1973 because the huge oil price
increases temporarily led to large current account deficits for the
industrial world and made OPEC a major source of capital for LDCs.
? From the early 1950s through the middle 1960s, the United States ran
fairly large surpluses while the other industrial countries had deficits;
thus, the United States was providing capital to help the LDCs develop
and to assist other countries of the industrial world in restoring their
economies. As these other industrial countries improved their economic
strength, they too began to run current account surpluses.
? By the late 1960s, the US current account position began to deteriorate
sharply, reflecting the continuing competitive losses to other industrial
countries. In this regard, it became clear that the dollar was overvalued.
? Since the realignment of the key world currencies against the dollar and
introduction of floating exchange rates in the early 1970s, the US current
account position and those of other countries have experienced wide
swings, reflecting ongoing exchange rate changes and the sudden rises in
oil prices.
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-601963 65
a Includes goods, services, and private
transfers. Data for 1982 are
estimated.
I I I ~ I I I I I I I I I I I I I C I
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US Current Account ? Service transactions have played an increasingly important role in US
Trends current account transactions.
? While the US trade balance (on a balance-of-payments basis) has
deteriorated from near zero in the first half of the 1970s to an average
deficit of some $30 billion per year since then, the service surplus has
climbed fairly steadily, reaching $36 billion in 1982.
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US Current Account Trends: Trade Versus Services
-40 1970 71 72 73 74 75 76 77 78 79 80 81 82
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Japan: Imports of ? Japanese imports of manufactures are small by any measure.
Manufactures
? They are small relative to those of other industrial countries.
? They are small in relation to Japanese exports of manufactures.
? They are small in the two-way trade among industrial countries. Thus,
Japan has not yet developed the large and fairly even flow of manufac-
tures with other industrial countries that has characterized the growing
interdependence among countries of North America and Western Eu-
rope, and between these regions.
? They are small when measured against GNP. Despite 10 years of
considerable efforts by the United States and the EC to make Japan open
up its market, the ratio of Japanese imports of manufactures to GNP re-
mains near the low level of 1970. In contrast, the United States and the
EC have each greatly increased their relative purchases in the past
decade.
? Japan shields its domestic market from foreign competition mainly
through an informal interaction of various interest groups, while tariffs
and other statutory trade restrictions play a minimal role.
? Foreign firms in Japan must deal with (1) an array of restrictions
involving inspections and approvals handled by an ambiguous bureau-
cratic process, (2) informal cartel arrangements among major producers,
and (3) unwritten guidelines under which buyers purchase goods mainly
from Japanese firms. As a result foreigners cannot easily pinpoint where
and how the restrictions are being applied.
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Imports of Manufactures: Japan, the US and the ECa Compared
Value in 1982
Billion US S
EC
United States
Japan
Ratio to Exports of
Manufactures, 1982
Percent EC
United States
Japan
Regional Trade in 1982
Billion $
EC from US 31
US from EC 28
US from Japan
Japan from US _ J 1 1
EC from Japan 16
Japan from EC i 5
As it Share of GNP
Percent
1970
1980
a Excluding Denmark, Ireland, and Greece; 1981 data or Itah
b II vcluding intra-LC trade.
?2.2
12.4
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Impact of Japanese ? The United States has taken the brunt of the Japanese export surge. US
Exports of consumers, of course, have benefited from the Japanese price/quality
Manufactures competition.
? Despite the recent rapid rise in Japanese exports to the EC, that group
takes a much smaller amount of such Japanese manufactures relative to
GNP than does the United States. In fact, the EC absorbed in 1982
about the same share of GNP that the United States did in 1972.
? In Italy and France the purchases of Japanese manufactures remain an
especially small portion of these countries' GNP.
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Industrial Countries: Imports of Manufacturers From Japan
1972
United States
1982
Canada
1972
1982
ECa
United Kingdom
West Germany
France
Italy
0 0.5 1.0 1.5 2.0
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Japanese Surges in ? Japanese companies are most aggressive in exporting manufactures when
Export Growth domestic demand falters. They do this by rigorous marketing and by
convincing workers to temporarily accept cuts in real wages.
? Firms in other countries also pursue such recessionary strategies, but the
Japanese do so in a much more forceful manner because of their
particular mode of business operations. Japanese companies are much
less able to reduce costs during recessionary periods. Their lifetime
employment practices mean that they cannot easily lay off workers. Their
comparatively high reliance on loan capital rather than equity capital
means they are burdened with continuing high debt servicing payments
and gain little by cutting back dividends.
? The unusually high coincidence of recessionary periods among industrial
countries (1974-75 and 1980-82) made the Japanese export drives even
more politically sensitive. Many countries accused the Japanese of
pursuing export-led growth at the expense of other industrial countries.
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Japanese Surges in Export Growth (Average Annual Rise
in Volume of Exports)
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United States: ? The US economy increasingly is dominated by service activities. Service-
The Growing producing industries now account for more than 70 percent of the US la-
Importance of the bor force and in the last decade provided for almost 90 percent of its
Service Sector growth.
? Relative to goods production, however, the service sector has been given
little attention because of the paucity of information on services and the
vague nature of these industries. In the international field, for example,
the United States divides "merchandise" trade into 10,000 categories; in
services there are fewer than 10 breakdowns.
? Indeed, the US economy is experiencing a service transformation, in
which a new set of linkages are being established through the growth of
"integrative services" that interconnect firms, units of firms, and indus-
tries at different stages of production or in different locations. The
distinctions between goods and service industries are increasingly break-
ing down, as the two aspects merge with each other. The most dramatic
expansion is now taking place in this integrative part of the service sector
that combines high technology with management/ marketing know-how.
This "information economy" marries computers and communications,
which include "software" of all types, and a great variety of financial and
diagnostic services.
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United States: The Growing Importance
of the Service Sector
Share of Total
Employment
Service-
producing
countries
Goods-
producing
industries
Service Share of
Growth in
Employment
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Selected US Service ? The other private services category contains some of the most dynamic
Industries: Share of and important service sector industries. But, because of the accounting
Foreign Revenues method used in balance-of-payments statistics, the category includes only
a small portion of the actual sales of these industries. For example,
another effort to try to account for the total foreign revenues of the
industries in this category came up with more than $30 billion in 1980.
This compares with less than $4 billion under the balance-of-payments
definition.
? Much of what might be included in the other private service balance-of-
payments category shows up in other service elements such as fees and
royalties, direct investment income, and private transfers. Large revenues
received by these industries also are likely to be included under
merchandise trade. For example, the price of computer hardware often
includes considerable outlays on software.
? Among many private service industries, foreign revenues now provide a
major share of the total revenues. In accounting, advertising, banking,
construction, and motion pictures, foreign revenues account for 30
percent or more.
? While the proportion of revenues derived from foreign sales remained
relatively low in the case of consulting, franchises, and information, they
are climbing rapidly and ar,; making an important contribution to
earnings.
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Selected US Service Industries, Share of
Foreign Revenues, 1980
Advertising
Motion picture rental
Accounting ("Big Eight" firms)
Banking
Construction (top 400 firms)
Accounting (all firms)
Leasing, transport and
equipment
Lodging
Information
Consulting
Franchises
Legal services
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