unemployment lines and some of the businesses and farms on the auction block are living, if unwanted, proof that the well-being of our citizens is linked to the well-being of citizens in the Third World. On the other side of the trade ledger, the developing countries supply about 40-45 percent of the goods which we import for our factories and consumers. Although we are richer in minerals than most industrial countries, the Third World supplies more than half the bauxite, tin, and cobalt used by U.S. industry. As indicated in the chart below, for some 11 other strategic metals and minerals, the developing countries supply more than half our imports. For some natural products, such as rubber, coffee, cocoa, and hard fibers, the Third World supplies everything we use. easily than words, I have included some further graphs to illustrate our trade and investment ties to the Third World. HJJHOZ. 38 28 INCOME AND REPATRIATED PROFITS FROM U.S. DIRECT (BILLIONS OF CURRENT DOLLARS) 38 Global recession in the past two years has brought an abrupt pause in the growth of developing countries' earnings. World trade has stagnated and the prices of non-oil commodities have fallen 28 percent from 1980 to 1982. This has increased debt service ratios and eroded terms of trade. The fundamental problem faced by high-debt developing countries is one of reviving their - exports an income earning problem, rather than a debt problem. But, immediately, they confront a financing problem as banks have cut back new lending from $47 billion in 1981 to around $20-$25 billion in 1982. This has imposed draconian cuts in imports. Moreover, Another severe contraction in lending this year would imperil the recovery of the debtor countries. reduced lending, in the face of increased debt service costs, would retard our own recovery by contracting imports by developing countries. Indeed, a Morgan Guaranty Trust Company study estimates that if capital flows into developing countries are cut by $25 billion, OECD growth would drop at least half a percentage point. With OECD growth in 1983 expected to be only 1.8 percent, half of a percentage point would represent a significant cut in growth. But import The Morgan Guaranty study is hypothetical. cuts are already a reality. I have cited the dramatic case of Mexico, whose imports from the U.S. dropped 60 percent from the first quarter of 1981 to the last quarter of 1982. The cut in Mexico's imports, if sustained, would represent a $10 billion loss in U.S. exports and the elimination of thousands of American jobs. The following chart shows the relation between economic growth in Mexico and U.S. exports. As you will note, as their economy contracts, so do our exports. 16-524 0-83-2 |