World economic outlook in 1994

During 1993, the world economy grew only about 2 percent, the continuation of a slow recovery from the bottom of the most recent downturn in 1991. the 1993 expansion was less than the average annual increase in world output during the 1980's. Low growth in the developed industrial economies and continued economic decline in the former Soviet Union and in parts of Eastern Europe have held back the world economy.

In 1994, world growth is expected to pick up modestly to around 3 percent. Even so, many of the factors that retarded economic development in 1992 and 1993 will continue to have carryover effects in 1994. In Europe, the adjustment to the cost of German reunification and the subsequent European exchange rate crises are still being felt. In Japan, the aftereffects of the deflation of a "bubble economy" continue. In the United States and most of the other industrialized countries, the process of industrial restructuring is continuing, adding to unemployment, hurting consumer confidence, and placing added pressure on government budgets.

Most of the world's developing areas continue to show economic strength. In 1994, their Economic growth is expected to be around 6 percent, about what it was in 1993. The International Monetary Fund (IMF) recently re-estimated the contribution of these economies to world output using more representative purchasing power parity exchange rates. The IMF found that developing country output accounts for approximately 35 percent of total world production, nearly twice the share previously estimated when using market exchange rates. These new estimates are important, in part because they highlight the growing role of the East Asian economies, particularly the Chinese economic zone (China, Taiwan, and Hong Kong), in establishing a new "fourth pole" for sustaining world growth.

In 1993, the economies of Central and Eastern Europe and those of the former Soviet Union progressed further in their transition to market-based economies. Poland, the Czech Republic, Hungary, the Baltic republics, and Slovenia have advanced the most. A few countries in the region probably had positive growth in 1993; many will do better in 1994. The transformation has been less successful in other countries in the area. In particular, most of the former republics of the Soviet Union remain mired in political and economic turmoil and face another year of economic decline. Poor economic management and, in some cases, ethnic warfare leave some of these new countries in a deep economic malaise.

Although the world economy generally turned in another disappointing performance in 1993, progress has been made in several areas that bode well for future growth. In particular, inflation has fallen in most of the world, including some areas, such as Latin America, that have struggled with rapid price increases for the last decade. Consequently, long-term interest rates have come down, allowing more rapid balance sheet adjustments and reducing the drag of debt overhang and asset depreciations that have retarded growth in many of the industrial countries. The lower rates also have helped to lower the debt burden of many developing countries. In addition, economic restructuring, privatization, fiscal budget discipline, and open capital markets have resulted in large inflows of direct and portfolio investment into much of the developing world, holding out the promise that its generally good economic performance of the past several years will continue.

The Industrial Countries

After growth of only about 1 percent in 1993, the industrial economies are expected to advance on average around 2 percent in 1994, the fifth consecutive year of sub-par economic performance (Table 1). The United States, Canada, and the United Kingdom are in their second year of economic expansion, while the remaining G-7 countries - Germany, Italy, France, and Japan - are just beginning to recover. Problems with large government deficits, high unemployment and low consumer confidence, and industrial restructuring will keep the recovery below average in most of the G-7 countries and in many of the smaller industrial economies. Looking beyond 1994, low inflation and falling long-term interest rates are hopeful signs that the current recovery will be a long one.

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Western Europe

With the fall of the Berlin Wall and German reunification, the countries of Western Europe got a fiscal boost that temporarily stimulated their economies. Subsequent fiscal and monetary restraints were then imposed to counter the inflationary stimulus of unification, further the goal of economic convergence within the European Community (EC), and maintain the viability of the EC's Exchange Rate Mechanism (ERM). Unfortunately, these restraints left the region in recession and (along with Japan) behind an economic recovery that is proceeding in most of the world. The economies of Western Europe as a group contracted in 1993. Among the major four countries - Germany, France, Italy, and the United Kingdom - only the latter recorded positive growth. The general outlook for 1994 is slow growth of 1 to 2 percent.

Several factors contributed to the current European recession and delayed a recovery, including the effort by some ERM countries to maintain their currencies within the narrow ERM bands by keeping interest rates high. As the downturn spread and worsened in 1992 and 1993, many ERM currencies began to come under speculative pressure as financial markets guessed (correctly as it turned out) that members could not maintain the high interest rates that would be required to keep their currencies in line with the German D-mark.

The unraveling of the ERM began in earnest in early June 1992, when Danish voters rejected the Maastricht treaty, the blueprint for complete European monetary and economic union. The rejection raised questions about the EC's plan for currency unification and, together with interest rate hikes by Germany's Bundesbank (central bank), brought increased pressure on the ERM. In September 1992, speculative attacks drove the British pound and the Italian lira from the system while other members had to devalue. After a series of crises, EC finance ministers were forced on August 1, 1993 to widen the currency fluctuation bands to plus or minus 15 percent, in effect ending the fixed exchange rate system of the ERM. This development allowed member countries to cut interest rates that hopefully will provide an economic stimulus. In addition, the devaluation of exchange rates has improved the price competitiveness of several EC members. Britain and Italy have boosted exports, thereby helping their economic recoveries.

The EC and other Western European countries face several additional problems. The breakdown of the ERM has added to the uncertainty surrounding the future prospects and process of economic unification. Although all 12 EC countries now have ratified the Maastricht treaty and are proceeding according to the original timetable, there is growing skepticism that the 1999 deadline for a single currency can be met. The delayed conclusion of the Uruguay Round trade talks, the slow pace of economic reforms in the former Soviet Union and in parts of Eastern Europe, and ethnic wars in the former Yugoslavia contribute to the uncertain climate.

Total employment within the EC actually declined in 1992, the first time since 1983, and the unemployment rate continues to grow. The number of unemployed in Western Europe was an estimated 22 million in 1993, including 17 million in the EC. According to EC estimates, annual economic growth in excess of 2.5 percent is required to bring down members' unemployment rates, now averaging more than 11 percent. The apparent emerging trend toward a shorter work week will, in effect, substitute "under-employment" for additional unemployment. The high levels of unemployment increase social spending and government budget deficits, which are at record levels - around 5.5 percent of gross domestic product (GDP). Policies to tighten fiscal policy and reduce the deficits will further constrain growth in the short run.

The German economy probably hit bottom in mid- 1993, and a slow recovery began late in the year. There is a growing consensus that Germany's problems are not solely related to the large cost of reintegrating the eastern part of the country or to the current European recession. More basic structural problems include Germany's high wage costs, a reliance on traditional industrial exports, and large and growing social costs. Within Germany, there is no consensus on possible solutions to these problems.

In the short term, German growth will be constrained by government efforts to slow social spending. The government deficit was about 5.5 percent of GDP in 1993, but is expected to fall in 1994 as spending cuts are instituted and some taxes are increased. Private consumption will give only a small boost to the economy. Wage settlements are expected to barely keep up with inflation, and the tax increases will cut spending power. Investment, which fell sharply in 1993, is expected to grow slightly in 1994. The volume of exports, down in 1993, may increase a little in 1994, depending in large part on the rate of recovery in Germany's traditional European markets.

Despite the end of the narrow-band ERM, French monetary policy continues to be rather tight, and real interest rates are high. Economic output in France fell by around 1 percent in 1993, and probably will grow by only about 1 percent in 1994. The strength of this recovery depends primarily on its export markets. Exports were the main source of French growth in 1992, but were flat in 1993. Consumer spending is expected to contribute little to the economic recovery because confidence is low, as it is in most of the continent. The French unemployment rate of almost 12 percent in late 1993 is the highest among the G-7 countries. The slow recovery that is projected may push unemployment to more than 13 percent in 1994.

Italy's economy was flat in 1993, and will show only small growth in 1994. Domestic demand has fallen, but strong exports have helped to stabilize the economy. Exports benefited from the country's early withdrawal from the ERM in September 1992. Italy gained a significant competitive advantage over its EC rivals, an advantage that has been reduced somewhat in recent months as other countries have devalued. Italy's domestic demand is down, largely because of significant economic restructuring. A new wage agreement among business, labor, and government has ended the practice of automatically linking wage increases to inflation. Also, the government has imposed austerity measures, which have cut the growth in Italy's overall public deficit.

The longest British recession since World War II ended in late 1992. The subsequent recovery was boosted by the U.k.'s early withdrawal from the ERM, while interest rates were cut sharply and the pound was devalued by around 13 percent. Investment spending and consumer spending both picked up moderately during 1993, but government fiscal policy is restrictive. Economic growth is expected to be almost 2 percent in 1993, and should be a little higher in 1994, as consumer confidence improves due to a stronger housing market and lower unemployment. However, the recession in Europe, continued fiscal tightening, and consumer debt overhang will act to prevent more rapid U.K. growth.

In general, the smaller European countries, which had economic declines in 1993, are expected to recover, but only slowly, in 1994. Most were affected by weak export markets in Europe. For those countries closely tied economically to Germany-Denmark, the Netherlands, and Belgium - the impact tended to be greater. In common with the larger economies, rising unemployment has put added pressures on already large fiscal deficits. Budget problems have been more troublesome in the Nordic countries because of their more generous social welfare systems. Sweden's deficit is close to 15 percent of GDP. In the case of Finland, the loss of traditional markets in the former Soviet Union has led to unemployment rates approaching 20 percent. On the other hand, Norway has come through relatively unscathed because of its oil exports.

Japan, Australia, and New Zealand

Following a small upturn of Japan's economy in the first quarter of 1993, there was some hope that the economic slide that had begun in 1992 was finally over. However, the economy slipped in the second quarter, and little relief appears in sight from Japan's worst economic crisis since the oil shock of 1973. The economy may record a decline in GDP in 1993, and growth of only about 2 percent in 1994. Weak investment spending, the strong yen, and sluggish growth in consumer spending will result in a slow recovery.

There is a growing belief among analysts that Japan's current problems are unlike those of previous business cycles and that more radical adjustments to the economy will be required. The number and scale of the problems facing the country are formidable. The private sector is far from adjusting its balance sheets following the runup in asset values during the "bubble economy" boom of the late 1980's. Japanese banks continue to carry significant amounts of troubled loans on their books. Likewise, the manufacturing sector is adjusting its future capacity requirements following substantial increases in investment during the boom years. Private capital spending fell in 1992 and 1993, and will remain weak in 1994, even though the Bank of Japan has cut interest rates to record low levels.

The Japanese government announced a new fiscal stimulus package in September 1993, the third in 13 months. Public works spending and private residential construction are the only two sectors showing strong growth. Consumer confidence is low, and consumer spending remains weak. Although the balance of payments surplus is at record levels, the volume of exports has increased only slightly in the last 2 years. The payments surplus is primarily due to an import slowdown and the strong yen, which pushes up the dollar value of Japanese exports.

Japan's official unemployment rate has crept up in recent months but remains low at about 2.5 percent. Many believe, however, that the true level of unemployment may be twice as high because Japanese firms continue to carry thousands of excess workers. In recent months a few large companies announced that they would be trimming their work forces. These developments, along with a new trend among Japanese manufacturers to move production offshore, have led to the expectation that Japan's tradition of lifetime employment in its large firms may be coming to an end.

Australia's slow economic recovery began in early 199 1. Growth increased to around 3 percent in 1993, and is predicted to be slightly higher (as much as 3.5 percent) in 1994. Even so, the rate of recovery is below previous upturns. Consumer spending was weak in 1993, but is expected to recover in 1994. Unemployment will drop only slightly, remaining above 10 percent in 1994. Inflation is low-below 3 percent. The major impediments to faster growth include government commitments to reduce the fiscal deficit and low international commodity prices. To a greater extent than most industrial economies, Australia depends on commodity production, both agricultural and mineral, for a large share of its total output.

New Zealand's recovery, which began in 1992, has a growth pattern that is similar to Australia's. Output grew around 3 percent in 1993, and is expected to be slightly higher in 1994. Inflation was low (less than 2 percent) in 1993, and unemployment, although high, has fallen below 10 percent.

North America

The Canadian recovery is nearly 3 years old, but it has been weaker than average. Growth picked up in late 1992; the economy advanced at a good clip through the first half of 1993; and GDP increased an estimated 2.5 percent in 1993. Continued economic restructuring has kept employment growth slow, however. High unemployment of about 11 percent and downward pressures on wages resulted in only slight increases in retail sales. Government efforts to reduce Canadian fiscal budget deficits, both at the national and provincial levels, have put an additional damper on economic growth. The election of a new government in October 1993 may result in less fiscal constraint since the new leadership ran on a pledge of creating more jobs.

Much of the recent growth in the Canadian economy has come from increased exports, particularly to the United States. Because of increasing gains in productivity and a fall in the value of the Canadian dollar, its products have attained new competitiveness, and exports should continue to do well, assuming that the U.S. recovery stays on course. Canada's economy could grow as much as 3.5 percent in 1994, the best prospect among industrial countries. However, key factors will be the pace of the U.S. recovery and the economic policies of the new Canadian government.

By almost any indicator, the economic recovery in the United States has been the slowest since World War II. As a result, improvements in job markets have been modest, and real wages and salaries continue to stagnate. After a growth spurt in the last quarter of 1992, the economy slowed in the first half of 1993. A pickup in consumer spending, business investment, and housing construction in late spring led to an economic acceleration in the second half. Consequently, growth was expected to be about 2.5 percent in 1993, with a further improvement to around 3 percent in 1994.

Continued low rates of inflation and long-term interest rates are important reasons behind the current U.S. recovery. Low interest rates have provided consumers and business with added cash as payments on home mortgages and corporate debt have been reduced. However, the recovery is getting no help from foreign trade. Beginning in 1992, foreign trade began to act as a drag on the economy. Important foreign markets slipped into recession, thereby cutting U.S. export growth, while increasing U.S. consumption spurred imports.

The U.S. economic outlook, while good, is not without risks. Continuing high-profile announcements of job cuts by major companies are helping to keep consumer confidence at near-recession levels. Minimal increases in real wages and salaries mean that consumers' purchasing power will rise slowly. The trade deficit is expected to continue to exert a drag on the economy through 1994, until economic recovery is well under way in Europe and Japan. In addition, uncertainty about the final shape of health care reform clouds the business picture.

The Developing Countries

Asia

Although current and prospective growth rates are not quite as high as those during the 1980's, many economies of East and Southeast Asia, including Hong Kong, Singapore, South Korea, Taiwan, Malaysia, Indonesia, and Thailand, continue to outpace those of every other region. According to a recent World Bank study of these seven economies, high savings rates, disciplined government fiscal policies, strong investment in education, technology transfers, and export promotion were important common elements behind their rapid economic growth. In 1993, they expanded between 5 and 8 percent, and similar economic performances are expected in 1994.

Although these seven dynamic economies still rely on exports to the industrial countries as an important engine of their growth, intraregional trade and internal demand play an increasing role in their development. Internal demand has been driven by the rapid growth in personal incomes and by needed infrastructure investments. For almost all of these countries, inadequate transportation and communications systems, labor shortages, and rising labor costs are obstacles to future rapid development.

China increasingly has become the engine of growth in Asia. The Chinese economy is huge and is growing rapidly - nearly 13 percent annually in 992 and 1993. Using purchasing power adjusted exchange rates instead of market exchange rates, the IMF has estimated that China ranks just slightly behind Japan in terms of total output. The Chinese economy is forecast to grow less rapidly in 1994 than in the previous 2 years, partly because of government efforts to reign in unproductive investment.

The rapid growth of China's economy and increasing investment flows, both in and out of the country, are major reasons for the importance of trade in Asia. A 1993 World Bank report on developing countries discusses the increasing role of a Chinese economic area. This fourth growth pole (in addition to the United States, Japan, and Germany) is expected to provide sustained long-term development that will strongly benefit other economies, not only in the region but elsewhere.

India is predicted to grow by around 5 percent in 1994, roughly as fast as in 1993. It has made considerable strides in recent years to open its economy, discarding many of the policies of self-sufficiency that India has promoted since independence. The government has cut import restrictions, liberalized the exchange rate, and Controlled its government spending better. Exports have increased, and inflation has been halved in the last 2 years. Although the economic reform movement has slowed, particularly in privatizing state enterprises, the outlook remains hopeful.

While the economies of many countries in East Asia, Latin America, and other developing regions have registered impressive gains in recent years, the number of success stories in sub-Sahara Africa is limited. The region generally has been in regression for the last decade, partly because of high foreign debt, declining infrastructure, deteriorating terms of trade, several wars, and a high incidence of AIDS and other public health problems. According to the World Bank, income per capita in sub-Sahara Africa fell about I percent per year during 1982-92. (In contrast, per capita income in all the developing countries rose at an annual rate of almost 1 percent in the same period, but this average was strongly influenced by the rapid annual increase of more than 6 percent in East Asia.)

Africa has been slow to embrace the privatization and structural adjustments that have attracted increasing amounts of private capital to other regions, particularly East Asia and Latin America. In addition, most foreign direct investment in Africa has gone into the minerals and mining sector, particularly petroleum, but near-term prospects for higher prices and profitability in these industries are not high. Africa relies much more than other regions on official loans and foreign aid for its capital inflows. These funds, however, often have been squandered on inefficient investments and unproductive public enterprises.

The 1994 outlook for sub-Sahara Africa is growth of 3 to 4 percent, resulting in only a small rise in per capita income, given annual population increases of about 3 percent. The economic forecast is highly uncertain, however, partly because several of the region's largest economies - South Africa, Nigeria, and Sudan - face difficult internal political conflicts.

Latin America

Economic growth in the region picked up slightly in 1993, mostly because its largest economy, Brazil, grew around 4 percent (compared with a decline of about 1 percent in 1992). In the last few years, as economic growth and stability have returned to various countries in die region, continued stagnation and high inflation in Brazil have placed a damper on overall Latin American growth. Despite some economic reforms in Brazil and moves to open its markets to external competition, inflation is still extremely high - close to 2,000 percent in 1993. Consequently, Brazil's economic outlook for 1994 is uncertain.

In Mexico, growth slowed in 1993 to about 2 percent, partly because of tight monetary policies that have forced interest rates up (but brought inflation down) and uncertainty about the final approval of the North American Free Trade Agreement (NAFTA). Growth in 1994 should be higher, around 3.5 to 4.5 percent, as the government has taken some steps to stimulate the economy. Mexico is the largest market for U.S. exports in Latin America, taking over half of the more than $70 billion in merchandise shipped to the region in 1993.

Argentina, another country that has successfully implemented broad economic reforms, grew around 3.5 percent in 1993, significantly less than in the previous 2 years, but at a more sustainable rate. Growth is expected to be about the same in 1994. Chile's economy slowed, from the nearly 10 percent increase in 1992 to a 6-7 percent rise in 1993. Growth probably will be in a similar range in 1994. Among the larger regional countries, Venezuela is the only one facing economic stagnation. Largely because of the slumping oil market, its economy was flat in 1993, and probably will decline slightly in 1994.

Latin America's economic prospects have improved significantly in the past few years. Economic reform and privatization programs have stabilized prices and attracted large inflows of private capital in much of the region. Private capital now accounts for about 70 percent of total capital inflows, of which nearly 30 percent is in the form of direct and portfolio investment. According to World Bank data, intraregional trade in Latin America increased from around 13 percent of its total trade in the mid-1980's to approximately 18 percent in 1992.

Middle East

Following the Gulf war, this region grew rapidly in 1992, largely because of post-war reconstruction efforts. Growth moderated somewhat in 1993, but it is expected to increase modestly to 4 to 5 percent in 1994.

Several issues facing the region create uncertainties about economic prospects there. The most important recent event is the historic accord between the Israeli government and the Palestine Liberation Organization. If the agreement leads to lasting peace and stability in the region, a fundamental requirement for stronger economic development, including more foreign investment and intraregional trade, will have been met.

To take full advantage of the region's potential will require much more comprehensive trade and economic liberalization than the countries there have embraced so far. Iran and Egypt have taken steps in this direction, but the pace of reform has been slow. Turkey has made the most headway toward opening its economy; it recently launched a more aggressive program to privatize state enterprises. In addition, oil output and prices remain a dominant factor in the Middle East's economic fortunes. A stronger world economy would help to strengthen oil prices and stabilize export earnings of the producers in the region, but a renewal of Iraqi oil exports might depress oil prices.

Eastern Europe and Countries of the

Former Soviet Union

The restructuring and privatization of economies in this region are in their fourth year. In some countries - Poland, Hungary, the Czech Republic, and Slovenia - significant progress has been made, and positive economic growth is returning. Others - Bulgaria, Romania, and Slovakia - lag in their efforts to restructure, and the beginning of a recovery is probably still at least I year away. Excluding Slovenia, the countries of the former Yugoslavia are in severe decline due to continuing hostilities there.

In 1993, Eastern and Central European economies faced major problems that retarded their development. Agricultural output was down because of drought. The former Czechoslovakia suffered because of its breakup into the Czech Republic and Slovakia. Reduced trade has hurt both of them, but the split has been particularly harmful in Slovakia, which is saddled with a disproportionate number of large, unprofitable state enterprises, many of which manufacture arms for markets that have disappeared. During 1991-93, exports to Western Europe began to replace lost markets in the former Soviet Union in a significant way, but the recession in Western Europe has slowed this process.

Although several countries in Eastern and Central Europe may record positive growth in 1994, it will be modest. It will take many years before living standards return to where they were prior to the collapse of Communism. Such constraints as the continued existence of large state enterprises and shortages of capital will restrict rates of growth for the foreseeable future.

Economic prospects are limited in most of the 15 republics of the former Soviet Union, especially the two giants - Russia and the Ukraine. Although the Russian government survived the August 1993 coup attempt by anti-reformers in parliament, and retains the support of most Russians, the economic situation remains difficult. Political turmoil in the Ukraine also has resulted in serious economic mismanagement. Most of the other former republics are in similar difficulties, except for the Baltic states, where some progress has been made in stabilizing currencies and reigning in government spending. Only a handful of the 15 republics now use the Russian ruble as their currency. According to most analysts, the economic outlook for Russia, Ukraine, and most of the other republics is for a decline of 5 to 15 percent of GDP in 1994.

U.S. Export Performance

Major Trading Partners of the United States

In 1993, for the second consecutive year, U.S. economic growth exceeded the average growth of the top 20 export markets for U.S. manufactured goods. (The reverse was true between 1984 and 1991 ). This recent economic performance has been the key reason behind the deterioration of the U.S. merchandise trade deficit in 1992 and 1993, following 4 consecutive years of improvement.

In 1994, the economic recovery that is expected in many important markets for U.S. goods should lead to more rapid U.S. export growth (Table 2). In contrast to 1993, when nearly one-third of the top 20 markets were in recession, only one country is expected to be in this situation in 1994. However, growth in several European economies is forecast to be slow, especially in the first half of 1994, and there are downside risks that may prolong the recessions of some of these economies.

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Foreign economic growth is important to the export success of many U.S.-based companies. The strong correlation between increasing U.S. exports and the economic growth of the 20 countries is shown in Figure 1; Mexico and Japan are the only two exceptions. U.S. exports to Mexico increased very rapidly between 1987 and 1992, despite the fact that Mexican growth was slightly below the average of the 20 countries during that period. Mexico's trade and investment liberalization policies and the anticipation of NAFTA explain this anomaly. Japan had higher growth than the 20-country average, but U.S. exports of manufactured goods there increased at a slower-than-average pace in the period.

All the countries with above-average growth during 1987-92 were in Asia. This fact clearly shows why the United States now trades more with its Pacific neighbors than with traditional trading partners across the Atlantic. On a broader regional basis, two of the three largest markets for U.S. exports - the Asian countries and Western Europe - are projected to grow slightly more rapidly in 1994 than in 1993. The third major area, Latin America, is expected to grow at about the same rate in 1994 as in 1993. Latin America continues to be a bright spot for U.S. export growth.

U.S. Export Price Competitiveness

Although the trade-weighted value of the dollar increased about 5 percent in 1993, this slight appreciation was not enough to erode U.S. price competitiveness in relation to its major export competitors. The 1993 trend in the value of the dollar was irregular, and there were some significant changes in the dollar's value against individual currencies. The dollar gained in value compared to most European currencies, except the German D-mark. Much of the increase came in mid-summer when the EC finance ministers widened the allowable currency fluctuation bands within the ERM. The dollar also rose in value against the Canadian dollar in 1993. On the other hand, the dollar's value fell sharply against the Japanese yen during the first part of 1993, when the dollar depreciated from about 125 yen per dollar in January to just over 100 yen in early August. The dollar recovered somewhat in the latter months of the year.

Overall, since 1985 trends in dollar exchange rates have been generally positive for U.S. price competitiveness. This is illustrated by Table 3, which shows the trend in the trade-weighted exchange value of the dollar over the last 7 years relative to trade-weighted indexes of the currencies of five competitor countries. Since 1985, the dollar has clearly trended lower, while other major currencies, notably the Japanese yen and German mark, have trended higher.

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In addition to the exchange rate, other factors have helped boost the price competitiveness of U.S. products. In particular, U.S. manufacturing productivity has risen sharply in recent years, and labor costs have grown modestly - especially in comparison to the five nations listed in Table 3. The bottom line is that the slowdown in the rate of U.S. export growth in 1993 was the result of sluggish growth in Europe and Japan, not the loss in price competitiveness of U.S. exports. Economic recovery in the EC and Japan will lead to stronger growth of U.S. exports in 1994 and beyond.

COPYRIGHT 1994 U.S. Department of Commerce
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