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U.N. Report: World Economy Could Slow on Woes in U.S.

GENEVA — A report by the United Nations warned that world economic growth may slow this year, with the rising U.S. trade deficit and falling dollar posing a risk to stability.<BR><BR>The report also noted that, while the dropping of textile and...

GENEVA — A report by the United Nations warned that world economic growth may slow this year, with the rising U.S. trade deficit and falling dollar posing a risk to stability.

The report also noted that, while the dropping of textile and apparel quotas among World Trade Organization members likely will boost the exports of many developing countries, nations including Bangladesh, Cambodia, Laos, Nepal, Kenya, Lesotho and Madagascar stand to lose ground.

The liberalized trade in the sector may lead to “the replacement of quotas with contingency protection measures like antidumping actions and special safeguards,” the U.N. warned.

It noted that international cotton prices may “fall further” as a result of peak harvests expected in Brazil, China, India, Pakistan and the U.S. contributing to an expected 17 percent increase in the supply of that fiber for the crop year ending in August. Cotton prices are down about 33 percent over the past year.

Overall, the report said world economic output this year should grow by 3.3 percent, less than the 4 percent growth posted last year. The report also predicted growth in world merchandise trade in terms of volume in 2005 to reflect the slowdown, and decelerate to 8 percent, down from last year’s 10.6 percent.

Ian Kinniburgh, the chief U.N. economist, said in a press briefing that the volatility in oil markets and the global trade imbalances pose downside risks to the projections. He said the imbalances, if not addressed, could trigger a “reaction from financial markets or governments.”

Action is required to deal with the U.S. deficit and sliding dollar, he noted, adding that countries that are producing economic surpluses, such as the nations of the European Union and Japan, need to do more to stimulate consumer spending.

“Greater international coordination will be needed to avoid a hard landing of the world economy,” Kinniburgh said.

This story first appeared in the January 26, 2005 issue of WWD.  Subscribe Today.