Industrialized nations are likely to ease out of recession, but their selfish trade policies threaten to thwart reforms in developing countries, according to an international banking report.
The Bank for International Settlements said the economic performance of the former Communist bloc was "dismal and disappointing." It urged Eastern European nations to speed up reforms and said there was an urgent need to prevent a breakdown of trade between former Soviet republics.BIS president Bengt Dennis told its annual meeting that the fight against inflation continued to be a top priority. He said inflation in industrial economies had fallen to just below 4 percent in the past 12 months compared to 5.75 percent at the end of 1990.
Dennis, head of Sweden's National Bank, voiced concern at the rising price trends in Germany because of the spillover effects on other countries. The BIS said control of German inflation was of major importance not only to Europe but to the rest of the world.
The BIS meeting at its headquarters in the Swiss city of Basel drew central bankers from 31 countries, including the world's biggest economic powers. The bank is a clearinghouse for national banks and a forum for policy coordination.
Its 243-page report, which covers the 12 months to the end of May, cited growing evidence that the United States was moving out of recession and that other countries would follow suit.
It said pessimism about an imminent worldwide slump or financial crisis was unfounded because of key signs like falling inflation and lower Third World debt.
"What, however, is much less predictable is the pace, shape and breadth of recovery," the report said.
The BIS reserved its sharpest criticism for rich countries' trade policies. A new generation of trade barriers had appeared and traditional restrictions on important Third World exports like farm products and textiles remained in place, it said.
"It is difficult to overstate the extent to which such measures undermine the multilateral trading system, distort the allocation of resources, weaken investment and act as a drag on the growth of the world economy," it said.
By contrast, 51 developing countries had announced measures to liberalize trade in the past five years and implemented often painful market reforms, it said. It urged wealthy nations to act quickly to prevent these reforms from unraveling.
"The industrial countries bear a heavy responsibility for the well-being of the world economy at large. To give developing countries and the countries in the process of transition to market economies free access to their markets is the greatest single contribution they can make to these countries' prosperity."
The BIS urged a quick end to the Uruguay Round of trade liberalizing talks, stalled for 18 months because of the row between the European Community and United States over farm subsidies.
The report said East European countries fared worse than expected last year because of delays in implementing structural reforms and the breakdown of trade with the former Soviet Union.
It urged governments in the region to press ahead with reforms and cut public spending. In particular, it said there was an urgent need to switch taxation away from enterprises to households.
It described the former Soviet Union as a "system beyond repair," characterized by increasing disintegration.
"Agreement on even the most vital reform measures has been virtually absent," the report said. It said the Russian government's early efforts to stabilize the economy by tax increases and spending cuts had been undermined by subsequent concessions.
It said it was vital for the Commonwealth of Independent States to coordinate reform measures and economic policy. It warned against the collapse of inter-republic trade, given that exports to neighboring states often amounted to 40 percent to 50 percent of gross domestic product.
It urged authorities to agree on new rules to govern trade between themselves as well as the rest of the world, and standard means of payment.
The BIS said in contrast to the developing country debt crisis of 10 years ago, the debt problems of Eastern Europe and the former Soviet Union did "not constitute a threat to the soundness of the international financial system."