Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: SUNDAY, January 23, 1994 TAG: 9401220057
SECTION: ECONOMY PAGE: EC-18 EDITION: METRO
SOURCE: RICHARD ALM DALLAS MORNING NEWS
DATELINE: LENGTH: Medium
The United States, Mexico and Canada passed the North American Free Trade Agreement, and now they began a 15-year process of dismantling barriers to trade and investment.
The European Union finally approved the Maastricht treaty, calling for a continental central bank and a single currency. The union slogged through another slack year, however, and in August more or less gave up trying to hold its monetary system together.
Amid political chaos, President Boris Yeltsin kept Russia inching forward on economic reform, but the country ended the year still stuck with what might turn out to be an even greater uncertainty.
In Asia, a booming China became what one business consultant called "the hotbed of capitalism." Meanwhile, Japan's economy resisted all attempts at resuscitation, and fed-up voters even tossed out the political party that engineered the country's post-World War II miracle.
And what a year for stocks! New York, London, Paris and Mexico City shot to record heights in December. A surge of cross-border investing lifted markets in Hong Kong, Singapore and Taiwan. On the down side, Japan's battered stock market took another beating.
For 1993, eventfulness lasted right up to the end. The United States and Europe locked horns in trade disputes over agriculture and movies, but a new round of global trade liberalization, under the General Agreement on Tariffs and Trade, emerged just hours before a deadline expired in mid-December.
This last item might rank as the most historical - if the United States and the 115 other GATT parties find the wisdom to ratify the pact. "Its economic benefits swamp those of NAFTA," said C. Fred Bergsten, director of the Institute for International Economics in Washington, D.C.
Unlike 1993, this year starts with no easy signposts. At this time last year, it was clear the Maastrict treaty, the North American trade deal and GATT's Uruguay Round would require action. Looking into 1994, the view is clouded. Less unfinished business litters the landscape.
New initiatives in trade - the GATT ratification and extension of the free-trade agreement to countries in Latin America - will wait until 1995, the White House says. U.S. Trade Representative Mickey Kantor, who did yeoman service in 1993, wouldn't have to work as hard this year if it weren't for the ongoing spats with the Japanese.
With so little to go on, it will be difficult to divine the themes for international business in 1994. Yet, one matter does stick out: The importance of finding the key to recovery of the global economy.
In the past three years, the big industrial democracies, the G-7, crawled forward at an average annual growth rate of 1.2 percent. Japan, Germany, Italy and the United Kingdom actually lost ground in 1993. By contrast, the final five years of the 1980s saw average growth of 3.2 percent for the leading countries, according to the Organization for Economic Cooperation and Development.
The year ahead is likely to find the needed upswing, forecasters say. The United States already shook off its doldrums. Europe and Japan, however, remain shaky, but governments are lowering interest rates and running deficits to prime the pump. The question: How strong and durable will the revival be in 1994?
Russia will bear watching this year. The strong showing by nationalist and Communist candidates in December's election puts tremendous pressure on Yeltsin's reformers to arrest the erosion of living standards.
The Russian president, for his part, vows to stick with the march to the market, but at the same time he's looking for ways to make the transition to capitalism less painful. Both the United States and the International Monetary Fund seem ready to allow Russia to backslide a bit - if it helps keep the old guard at bay. It will be another jittery year in Moscow.
Latin America's free-market reforms seem solid - with one exception. Keep an eye on Brazil's elections in October. Luis Inacio da Silva, an avowed socialist in a country skeptical of repeated promises of reform, starts the year as the front-runner.
One of the more intriguing aspects of the upcoming year might be the arrival of new players in the global economy. A decade ago, what really mattered economically were the United States, Canada, Western Europe, Japan and a few countries on the eastern edge of Asia, such as Taiwan and South Korea.
Epochal events greatly enlarged the world for business. The fall of communism stretched Europe's economic zone to include Eastern Europe and the splintered remnants of the Soviet Union.
Once-suspect places could command new attention this year. The accord between Israel and the Palestinians creates intriguing possibilities in the Mideast, particularly in Egypt. Foreign business will return to South Africa as embargoes end and open elections take place this year.
For international business, this year may not post as many historical marks of 1993. Even so, the next 12 months are likely to be eventful in their own right.
Keywords:
YEAR 1993
by CNB