News brief– May 2004 edition

OECD Observer

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Trade rises

Total merchandise import volumes of the G7 countries were up by a seasonally adjusted 3.5% in the final quarter of 2003 compared with the previous quarter, while export volumes increased by 1.9%, according to our latest statistics released in April. Compared with the fourth quarter of 2002, imports rose by 5.1% and exports by 3.7% in the fourth quarter of 2003.

Compared with the third quarter of 2003, Germany’s trade volumes were up by 5.4% for imports, but exports fell 0.2%. On a year-to-year basis, Germany’s trade volume growth was the highest of the G7 countries, with 10.6% for imports, but only slightly above the G7 average for exports.

In the United States, import volumes increased by 4.3% in the fourth quarter compared with the third, while export volumes were up by 4.9%. Compared with the fourth quarter of 2002, exports increased by 7.2%, while imports climbed 5.4%.

The volume growth of Japanese exports was the highest of the G7 with 5.1% in the fourth quarter, compared with the third quarter, while import volumes grew 2.0%. On a year-to-year basis, Japan’s export volume growth in the fourth quarter was 7.1%, while import growth was 7.2%.

Pollution most urgent, says poll

Pollution is the most urgent environmental policy problem on the agenda, according to OECD Observer readers. Asked to choose between four broad categories – pollution, climate change, urban congestion or sprawl and deforestation/biodiversity – the results of the Observer’s online opinion poll show that 42% of respondents overall believe pollution should be the top issue on the environmental agenda. Interestingly, a remarkable 52% of respondents to the poll on the French edition (voir sondage ) highlighted pollution as the most prominent issue, compared to 33% for the English edition.

Climate change was the main environmental problem for 24% of the voters overall. Some 28% of respondents to the English version chose climate change, compared with 19% for the French edition. A further 22% overall thought the threat to biodiversity and deforestation should be addressed first, while 12% of the overall vote went to urban congestion or sprawl.

The OECD Observer’s opinion poll, which was purely indicative and not scientific in its sample, ran from February to April to coincide with the OECD Environment Ministers meeting on 20-21 April. A total of 1,758 votes were cast, of which 952 were for the English edition and 806 were for the French version.

Tax havens progress

Major progress has been made in the effort to eliminate harmful tax practices in the OECD economies. More than 30 of the preferential tax regimes identified in 2000 as potentially harmful have been modified or abolished.

According to the 2004 progress report on the OECD’s Project on Harmful Tax Practices, released in March, out of a total 47 preferential tax regimes cited in 2000, 18 regimes have been abolished or are in the process of being abolished, 14 have been amended so that any potentially harmful features have been removed, and 13 have been found on further examination not to be actually harmful. Two regimes, those of Switzerland and Luxembourg, are to be the subject of further discussion later this year.

Bill McCloskey, chairman of the OECD’s Committee on Fiscal Affairs which is leading the drive against harmful tax practices, hailed these positive results. “The work has resulted in real change,” he said in a statement. “OECD countries have shown that they will take action to ensure that tax competition is fair.”

The full report is available at

Growth ahead

The OECD area as a whole seems set for further growth, according to the latest composite leading indicators published in April. Forecasts from the Economic Outlook due in May were under embargo at the time of writing. However, figures for the US and the Euro area show signs of slightly weakening economic performance, according to leading indicators for the OECD area, which increased by 0.2 point in February to 123.2. The six-month rate of change indicated a downturn for the second month in a row after almost a year on the rise.

In the US, leading indicators were up by 0.2 point as well, with the six-month rate of change down for the second month after strongly increasing for the previous nine consecutive months. Similarly, leading indicators for the Euro area rose 0.3 point, while the six-month rate of change fell for the third consecutive month. Germany’s leading indicators increased by 0.1 point, with the six-month rate of change down for the second month in a row.

Japan continued to show signs of recovery. Leading indicators there were unchanged and have been relatively stable since July 2003. The OECD’s leading statistics cover a wide range of key short-term economic indicators and are designed to provide early signals of turning points (peaks and troughs) in economic activity. More information on OECD leading indicators can be found at

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Jobless rate holding

Unemployment seems to be holding steady in the OECD area, albeit still above optimal levels. At 6.9%, the unemployment rate in February 2004 remained unchanged for the third month in a row, though 0.1 percentage point lower than a year earlier

For the Euro area as a whole, unemployment remained at a steady, but high, 8.8%, down 0.1 percentage point from the same period in 2003. While France posted a 0.2 percentage point rise to 9.4% and Germany a 0.1 percentage point increase to 9.3%, the UK and Italy showed declines in their jobless rates, down 0.1 percentage point to 4.8% and 0.4 percentage point to 8.5%, respectively (the latest Italy figures are, however, for January 2004).

Unemployment in the US rose 0.1 percentage point in March 2004 to 5.7% from the previous month, but as with the OECD average, declined 0.1 percentage point from the same period a year earlier. Canada’s jobless rate similarly posted a 0.1 percentage point drop year on year, to 7.4% in February 2004. A larger decline was seen in Japan, where unemployment fell 0.2 percentage point year on year to 5.0%.

Tax wedges fall

Tax wedges on labour – the difference between what employers pay out in wages and social security charges and what employees take home after tax and social security deductions – are falling in many OECD countries, helping to reduce a major obstacle to job creation and people’s willingness to work. According to the forthcoming OECD publication, Taxing Wages, the tax wedge for a typical married production worker with two children, measured as a percentage of the overall cost to the employer, has declined over the last seven years by about one and a half percentage points across OECD countries.

Ireland saw the biggest fall in the tax wedge from 1996 to 2003, with a reduction of 18.3 percentage points, followed by Hungary at 9.9 percentage points, the US at 8.3 percentage points, Italy at 8.2 percentage points and the UK at 7 percentage points. However, in a number of countries the tax wedge increased over the period, with Iceland seeing the biggest increase, at 9.5 percentage points, followed by the Slovak Republic at 7.1 percentage points and Turkey at 3.8 percentage points.

The rates of personal income taxes, social security contributions and cash benefits in OECD countries vary widely, depending on a worker’s income, family circumstances and country of residence. But Taxing Wages also confirms some significant features common to taxation systems in most OECD countries. Most OECD countries continue, for example, to offer significant benefits to married couples with children compared to single earners.

Further information from Taxing Wages at:

©OECD Observer No 243, May 2004

Economic data


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