Trade policy and prospects

Abstract

The world economy performed moderately in 1987 registering a growth rate of 3.2 per cent. It is expected that growth in 1988 would be around 3.8 per cent. Most of the momentum for this world growth comes from domestic consumption and investment spending in West Germany, Japan and to some extent in the U.S. For trade to improve, some signs of adjustments in the twin deficits of the U.S. should appear, particularly following further declines in the value of the dollar. Figures for 1988 so indicate some improvements in the U.S. trade deficits and declines in Japanese and West Germany's trade surpluses have also taken place. Developing countries have benefitted from stability in commodity prices in 1988. The rising trend of trade protectionism in industrialised countries is posing a threat to the liberalisation of world trade. There are indications that non-tariff measures and tariff rates are on the rise. Therefore participation in the current Uruguay round of MTN becomes all the more important for developing countries including Malaysia. The challenges for the Malaysia economy are many and they depend on the options that it would adopt in the face of trade and fiscal imbalances in the three major industrial nations, trade protectionism and third world debt problems.