Meaning of YEAR IN REVIEW 1998: TRANSPORTATION in English

Aviation Although the world airline industry in 1996 experienced both its highest-ever load factor (the proportion of seats offered that were sold) and a decline in net interest charges on purchase or lease of aircraft, the record profitability of 1995 was not sustained. According to the International Air Transport Association (IATA), profitability in 1996 on international scheduled services was $3 billion, compared with $5.2 billion the previous year. This drop reflected increasing cost pressures, notably from higher aviation fuel prices and the higher value of the U.S. dollar in relation to other world currencies. Pierre Jeanniot, IATA director general, commented, "The airlines will need to do much better than that during 1997 in order to complete their recovery from the losses of 1990-93. In theory, the prospects for this are good. Traffic growth remains buoyant, driven by fundamentally favourable economic conditions. Record load factors are being achieved. Indications are that unit costs continue to fall." The IATA projected that future profitability depended on moderation in adding capacity and on success in controlling unit costs. IATA airlines carried some 1,185,000,000 passengers in 1996 on their scheduled services, 8.4% over 1995 on international flights and 4.4% higher in the domestic sector. Overall freight tonnage grew by 4.6% to almost 24 million. At the end of 1996, 11,711 Western-built jet aircraft and 5,221 turbo-prop aircraft were in commercial service. The jets, operated by 650 airlines, during the year flew 30 million hours. By mid-1997 rapidly rising orders for new aircraft were placing an immense strain on the production capacity of the two remaining major Western aerospace companies, Boeing-McDonnell Douglas (now officially known as the Boeing Co.) and the European consortium Airbus Industrie, with Boeing struggling to meet what it termed "the steepest production increases since the dawn of the jet age." The Seattle, Wash.-based manufacturer increased its staff by 14,000 over 1996-97 in its attempt to increase deliveries by mid-1998 to 43 airliners a month, compared with about 18 a month in 1996. Air safety continued to be a prime concern. A total of 19 jet aircraft losses occurred during 1996, a loss rate of 0.63 per million hours. This compared with 1995 figures of 17 losses and a rate of 0.65 per million hours. Although the number of aircraft losses was similar, 1996 was a worse year for fatalities, with 1,189 passenger and 97 crew deaths, compared with 383 passengers and 39 crew members in 1995. Also, 21 acts of unlawful interference, including hijackings, were committed against civil aviation during 1996, four more than in 1995 but considerably down from 1994 and 1993, when the figures were 42 and 49, respectively. Overall, airlines continued to enjoy bullish conditions. Most forecasters saw an annual increase in number of passengers of about 6% per year during the 1997-2001 period, with highest average passenger growth rates in Asia (7.4%), the South Pacific (7.3%), Latin America and Africa (6.6%), Europe (6.2%), North America (6.1%), and the Middle East (5.1%). Any euphoria was, however, tempered by a number of worries. The U.S. air traffic control system suffered a series of freak accidents at several facilities in the fall, including "impossible" power failures at National Airport in Washington, D.C., and the air traffic control centre in Kansas. As skies became increasingly crowded, the industry accelerated progress to implement fully FANS (Future Air Navigation System), a global network of satellites aimed at making use of airspace capacity more efficient by improving communication systems and achieving greater accuracy in navigation and air traffic surveillance. In 1996 airport landing and related charges, at $6.5 billion, and air navigation charges, at $5.2 billion, were each $300 million higher than in 1995. Together they amounted to 8.9% of the industry's worldwide international operating costs--but for some airlines they were as much as 25%. In addition, the industry, the IATA warned, faced "new threats of environmental and value-added taxes, both of which are often discriminatory and can distort competition." Airlines continued to forge marketing mergers with one another in an effort to stem the rise in costs, although activity in this sector became less frenetic than in previous years. In an effort to maximize profits, many carriers improved their business- and first-class sections, and the IATA established a multidisciplinary task force to study the possible future effects of European monetary union on airline costs and revenues. ARTHUR REED Freight and Pipelines The inland collection and distribution of containerized freight was dominated in 1997 by road transportation, although there were signs in Europe that rail and barge traffic was making inroads as a result of environmental considerations. Worldwide, freight moved most often from Asian ports, which accounted for two-thirds of the movement in the top 20 ports. Hong Kong and Singapore continued to lead the world, each handling nearly 14 million TEU (20-ft equivalent units). Within the area Japan's eight leading containerports handled nearly 10 million TEU, and in Vietnam, Ho Chi Minh City opened a new container-handling facility and announced a $1.4 billion master plan for its ports. In Europe, Italian ports benefited from the privatization of terminal operations, and the strong growth of U.S. Pacific ports led to a new $2 billion project in the Alameda corridor serving Los Angeles. Growth in pipeline construction was modest, up 8% from 28,165 km (1 km = 0.62 mi) in 1996 to an expected 30,250 km in 1997. Continued concern with economic risks, together with increased competition and regulatory changes, accounted for some caution in an otherwise positive outlook. In Europe the focus remained on the North Sea, particularly the NorFra (Norway-France) 830-km pipeline project with its terminal at Dunkirk, France. Farther east a trans-Eurasian pipeline network was planned to link Turkmenistan to China and Japan. Myanmar (Burma) joined Malaysia and Thailand with major pipeline proposals to meet internal needs. Australia began a 1,500-km gas line project to link into fields in Western Australia. In China construction began on a $1,750,000,000 crude oil line from Korla to Luoyang and a $724 million products line linking Guangdong province to Hainan Island. In August a 465-km-long, 61-cm (24-in)-diameter pipeline linking Argentina to Chile was completed. A 3,020-km gas line to link Bolivia to Brazil was projected. There were plans for a $200 million fuel pipeline to link the Texas Gulf Coast to Oklahoma, Kansas, and Colorado, extending an existing 1,450-km line by more than 640 km. Intercity Rail The revival of intercity rail service continued in 1997, although achieving financial viability remained a difficult goal. World expenditure on track and rolling stock during the year totaled more than $20 billion. Much railway development was being financed by privatization, but no single approach prevailed. Both Swiss and German railways chose to restructure their companies so as to retain state control. Less- wealthy countries, including Peru, Pakistan, Mozambique, and the Czech Republic, opted for direct privatization. Japan introduced 300-km/h service on its 554-km line from Shin Osaka to Hakata and thereby regained the world's fastest timetabled service (1 km = 0.62 mi). Japan also began testing a 550-km/h prototype train and planned to develop a 320-km/h service that would produce less noise and require less maintenance than its other lines. Belgian National Railways completed its high-speed Thalys line from Antoing to Brussels. Italy and Germany continued to plan extensions to their networks, the latter allocating funds for a 280-km magnetically levitated line linking Hamburg and Berlin. China planned to introduce 180-km/h intercity services on four routes from Beijing, which would enable journeys up to 1,500 km to be undertaken without overnight travel. By 1997 tilting trains were no longer a novelty. Almost 1,400 were in service, and an additional 1,200 were on order. Other advances in services included special facilities for disabled persons on Spanish trains and electronic way-finding facilities for blind passengers in London. Switzerland planned to increase the rolling motorway services of its Ltschberg Tunnel in order to meet its constitutional commitment for rail rather than road to carry freight across the nation by 2004. Increasing rapprochement between Argentina and Chile led to a feasibility study of a 25-km railway tunnel through the Andes Mountains. The United Arab Emirates were examining the possibility of a rail link from Dubayy to Abu Dhabi for reasons of pollution reduction. Russia was seeking to encourage the development of a 3,100-km section from Baikal to Amur, to parallel the Trans-Siberian railway. It also completed a new 100-km link between Zarubino, Russia, and Hunchun, China. Roads and Traffic The remorseless growth of traffic was in 1997 yielding ever-greater congestion in urban areas and ever-growing concern for air quality and the environment. Vehicle emissions were estimated to contribute nearly half of the carbon dioxide that was considered to be the primary cause of global warming. In deciding whether they should encourage the expansion of urbanization, governments were torn between quality-of-life issues, such as increased pollution and congestion, and wealth creation, which is linked to improved distribution networks. Paris experimented with banning cars with odd/even registration numbers on alternate days, a practice already common in Athens. In London an expressway section to the airport was designated for bus/coaches only, and San Diego, Calif., experimented with an automated traffic-management system on its freeways. Traffic control measures seemed likely to have a greater future than new expressways in major cities, although some limited construction of underground routes and major bridge links continued. The opening in March-April of the 1.6-km (1-mi) dual three-lane Cheung Ching tunnel and the Tsing Ma bridge, the longest dual-deck bridge in the world, provided key links in the access to the new Chek Lap Kok airport on Lantau Island in Hong Kong. The project was part of the strategic network of transport development in China that also included the $200 million Jiangyin Bridge across the Chang Jiang (Yangtze River). South Korea reopened the Songsu Bridge in Seoul, which had collapsed in 1994. In Portugal the second crossing of the Tagus River, the 18-km Vasco da Gama Bridge, was the biggest private-sector infrastructure project under construction in Europe. It was taking place a short distance upstream from the Tagus bridge, which was undergoing a complex strengthening exercise. The Melbourne (Australia) Citylink, including twin 1.6-km tunnels, was a 34-year project devised under a build-own-operate-transfer arrangement; it reflected the twin ambitions of private-sector involvement and environmental concern. The worldwide squeeze on funding for new roads was typified by the slow progress on the main highway on Vancouver Island, British Columbia. Shipping and Ports According to figures released by Lloyd's Register of Shipping, the world fleet at the end of 1996 stood at a new high of 507.9 million gt (gross tons), an increase of 17.2 million gt over the previous year. This confirmed the steady growth of the world fleet during the past 30 years. The oil tanker component of the fleet grew by 2.1 million gt to 146.4 million gt, and the bulk carrier fleet increased by 5 million gt to a total of 151 million gt. A significant increase was in the containership fleet, which, boosted by deliveries of large vessels, increased by 11% to 43.1 million gt. Because there was little scrapping of containerships, the fleet was growing at a rate some considered alarming. Unless traffic volumes became greater than expected, as some industry observers had predicted, the market appeared to be in danger of chronic overcapacity. Concern about the ability of a substantial part of the world fleet to meet the July 1998 International Safety Management Code deadline was voiced by William O'Neil of the International Maritime Organization and seconded by ship classification societies. O'Neil warned the industry that the deadline would not be altered, even though only a small percentage of the 19,000 ships required to be certified had achieved that status. Failure to comply would place owners in breach of the International Convention for Safety of Life at Sea and cause ships to be detained by a number of important maritime countries, with serious consequences for international trade. Because the world's ports mirrored shipping industry trends, there was an increasing need for the large container ports to become hubs that would be able to serve the newly formed liner consortia. In the Asia-Pacific region, Hong Kong and Singapore were the main exponents of this role, but the same was also true of such European ports as Hamburg, Ger., Rotterdam, Neth., Antwerp, Belg., and Felixstowe, Eng., and, in the U.S., New York City. The level of scrapping decreased by about 1.7 million gt to 7.8 million gt. India, Bangladesh, and Pakistan remained the most active areas for ship demolition. EDWARD CROWLEY Urban Mass Transit As a counter to continued public unease arising from growth in car ownership, urban congestion, and air pollution, urban mass transit systems continued to proliferate and expand in 1997. An estimated $6.5 billion was being invested in mass transit systems in major cities throughout the world. New light-rail lines (lines usually powered by electricity) were opened or extended in Amsterdam; La Corua, Spain; Dallas, Texas; Jena, Ger.; Rouen, France; Sydney, Australia; and Toronto. New openings did not, however, reflect the significant numbers of systems under construction. In the Pacific Rim, Kuala Lumpur, Malaysia, planned to have three integrated lines open by 2000, and Inchon, S.Kor., was on track to have a fully automated system by 1999. Manila, Hong Kong, and Singapore were also working on extensions of their systems. In Europe lines were under construction in Bratislava, Slovakia; Croydon and Docklands (London); Cagliari, Italy; Dublin; Izmir, Tur.; Montpellier, France; Turin, Italy; Utrecht, Neth.; and Valencia, Spain. Many more light-rail systems were in the planning stage, including those in Cali, Colom.; Bordeaux, France; and Denver, Colo. In Vancouver, B.C., the skytrain system was being extended. Many cities, including Stockholm, Toronto, and New York, were refurbishing stations and/or rolling stock. New or extended lines opened in Bilbao, Spain; Belo Horizonte, Braz.; Madrid; Shanghai; Taipei, Taiwan; and Tokyo. New lines were planned for Budapest; Puerto Rico; Istanbul; Ho Chi Minh City, Vietnam; Lima, Peru; and Alexandria, Egypt. New light-rail service was established for airports in Oslo; Hong Kong; Salt Lake City, Utah; and Kyoto, Japan. As with intercity rail, the private sector was funding many of these developments. Buses remained the backbone of urban services. The year saw significant progress in the development of buses with low floors for handicapped riders and in the use of commercial hydrogen fuel cells. JOHN H. EARP See also Architecture and Civil Engineering; Business and Industry Review: Aerospace; Automobiles; Energy; The Environment. Economic Affairs United States. The U.S. stock market achieved record levels in 1997 as the bull market maintained its upward momentum in spite of several significant setbacks. The increase of short-term interest rates by the Fed caused a dip in April, but the most traumatic event of the year was the sharp decline on October 27 and the next day's rebound, when record trading volume was achieved on all the exchanges. On October 28, for the first time in history, the New York Stock Exchange (NYSE) had trading volume of 1,200,000,000 shares, shattering the previous one-day record of 684,590,000 shares. Turnover on the over-the-counter market, monitored by the National Association of Securities Dealers automated quotations (Nasdaq) index, was 1,370,000,000 shares, well above its previous record of 970,700,000. The widely watched DJIA broke 7000 on February 13 and climbed irregularly to a peak of 8259.31 on August 6. The price-earnings ratio of the Dow Jones industrials at the end of September was 21.26, compared with 18.26 a year before. The market jolt on October 27 resulted in the Dow's dropping 554.26 points, or 7.18%, with a next-day recovery of 337.17 points, or 4.71%, the largest point gain ever. During October the Dow slid 7.7%, but for the year the average was up nearly 1,500 points, or 22.64%. Extreme volatility in December, partly as a result of the financial crisis in Asia, pushed the DJIA well down from its August peak before it recovered somewhat to finish the year at 7908.25. The Standard & Poor's index of 500 stocks (S&P 500) achieved a record of 983.12 on October 7, while the Nasdaq index reached a high of 1745.85 on October 9 and the Russell index of 2000 stocks hit 465.21 on October 13. Late in the year investors turned cautious, despite a booming economy, as a number of Asian markets sustained heavy losses. On average, investors achieved stock market returns in excess of 21% during 1997. The business and economic news throughout 1997 was very positive. The National Association of Purchasing Management index of expected business conditions was more positive than it had been in 1996, and the consumer confidence index published by the Conference Board achieved record levels. The index of industrial production rose steadily in 1997, with the third-quarter jump the biggest in 13 years. The economy was growing at a healthy rate throughout the year. The industry operating rate was 84.4% in September, the highest since February 1995. The U.S. unemployment rate declined below 5%, which raised concerns about inflationary pressures, and the actions of the Fed were closely watched by investors. The national budget deficit fell to $22.6 billion, the lowest since the early 1970s, and most economic signs were encouraging during the year. Although the market was somewhat volatile on an uptrend, investors placed record sums into mutual funds of all kinds. The stocks of companies with low levels of capitalization (small-cap stocks) underperformed in the first three quarters of 1997 by failing to generate the earnings momentum that large-cap stocks exhibited. Large-cap stocks delivered so well that the price-earnings multiples of the top stocks in the S&P 500 rose from 18 to 25 times earnings. Early in October Greenspan described the reemergence of inflation as without question the greatest threat to the U.S.'s economic expansion. His remarks caused a drop in the Dow that day, and the 30-year Treasury bond yield rose to 6.4% after his remarks provoked fears that interest rates would need to rise. Margin calls were very heavy on October 27. The level of margin credit at major brokerage firms was at an all-time high of almost $125 billion, up more than 25% from the previous year. After Greenspan's warning about "irrational exuberance" in the market, the October crash was viewed as a healthy readjustment of expectations. More than 40 million U.S. families owned stocks in 1997, a record high. By September 30, there were $86.7 billion in domestic equity issues. Equities as a percentage of household financial assets were 31% at the end of the third quarter of 1997. High-yield ("junk") bonds were only 21% of all corporate debt issued. The largest public corporations, ranked by market capitalization in billions, were: General Electric Co., $224.5; Microsoft Corp., $164.6; Exxon Corp., $160.4; Coca-Cola Co., $148.4; and Intel Corp., $141.6. Wall Street firms raised $943,900,000,000 in the first three quarters of 1997, slightly below the $967,700,000,000 raised in the same period of 1996 and below the record of $1,050,000,000,000 in 1993. The number of new issues increased by 28% in the first three quarters to 2,721, up from 2,123 a year earlier. By late in the year, 469 initial public offerings of stock had raised $24.2 billion. The leading managing underwriters of corporate securities, ranked by dollar amount raised through new issues, were Merrill Lynch & Co.; Morgan Stanley Dean Witter; Salomon Brothers; J.P. Morgan & Co.; Goldman, Sachs; Lehman Brothers; Bear, Stearns & Co.; Credit Suisse First Boston; and Chase Manhattan Corp. The top merger and acquisition deal in 1997 was WorldCom, Inc.'s acquisition of MCI Communications Corp. for $37 billion. Other major deals included NationsBank Corp.'s taking over Barnett Banks, Starwood Lodging Trust's acquisition of the Sheraton chain from ITT Corp., First Union Corp.'s taking over CoreStates Financial Corp., and Lockheed Martin Corp.'s acquisition of Northrop Grumman. Interest rates remained relatively steady in 1997. At the end of October, the prime rate was 8.5%, up from 8.25% a year earlier, while the discount rate at 5% was unchanged. Thirty-year Treasury bonds were 6.14%, down from 6.83% a year earlier. Treasury bills were at 4.97%, down from 5.04% in 1996. The interest rate on three-month Treasury bills ranged from a high of 5.5% in March to a low of 4.8% in June and finished the year at 5.18%. The NYSE had its busiest week in history in November, with 3,990,000,000 shares changing hands. There were 3,050 companies listed, and 487 brokerage firms were members with trading authority. The average daily volume was 541,000,000 at the end of September. A seat on the NYSE sold for $1,475,000 on July 31; a year earlier a seat had sold for $1,162,000. Market capitalization totaled $8,890,000,000,000 on October 25 but declined to $8,310,000,000,000 on October 27, a drop of $580,000,000,000 in one day. "Circuit breakers" were activated for the first time in October, halting trading for 30 minutes when the Dow dipped to 350 points below the previous day's close and again for an hour after the market index had dropped a total of 550 points. Of the 4,182 stocks listed on the Big Board (up from 3,895 in 1996), 3,110 advanced, only 975 declined, and 97 remained unchanged for the year. Computer maker Compaq Corp. topped the active list, with more than 1.6 billion shares traded. (For New York Stock Exchange Common Stock Index Closing Prices, see Graph.) Sales volume on the American Stock Exchange (AMEX) rose by slightly more than 1% in 1997. As of October 17, volume was 4,705,524,000 shares, compared with 4,584,983,000 shares in the same period a year earlier. The record volume on October 28 was about 60,600,000 shares, some 40% ahead of the previous record of 43,900,000 shares traded in a single day. Advances exceeded declines by 651 to 329, with only 13 issues unchanged. Nasdaq volume in 1997 rose 16.9%, with an average daily volume as of September 30 of 699,000,000 shares. Through October 17 the volume was 128,582,754,000 shares, compared with 110,022,495,000 for the corresponding period in 1996. The total market capitalization was $1,930,000,000,000 on October 25, but it dropped $140,000,000,000 on October 27 to $1,790,000,000,000. Nasdaq had 5,500 companies listed (more than half of which advanced for the year), and in October it became the first U.S. stock market to trade more than one billion shares in one day. Intel Corp., headed by Andrew Grove (see BIOGRAPHIES), was the most active stock, with more than 3,800,000,000 shares traded. Nasdaq's Bulletin Board, on which some 7,000 very small companies traded, was the subject of concern because there were virtually no listing requirements. Nasdaq proposed delisting those companies that failed to file their financial statements with the Securities and Exchange Commission (SEC). Among those companies affected would be major overseas corporations that traded American Depository Receipts on the Bulletin Board. There were 6,685 active mutual funds late in 1997, with total assets of $4.2 trillion. Money market mutual funds held $1,046,000,000,000 in assets. Through mid-October U.S. stock funds gained 27.37% in value, whereas bond funds were up only 6.88%. More than 80% of U.S. mutual funds outperformed the S&P index, with technology and small-cap funds the stellar performers. Investors funneled new money into mutual funds at a record pace in 1997. The stocks in the S&P indexes showed significant gains in 1997. At the year's end, the S&P industrial index was up 28.9% from Dec. 31, 1996; utilities rose 18.61%, financial 45.38%, and the S&P 500 31.01%. The Dow indexes reflected similar gain patterns in 1997. The industrials index was up 22.64%, with transportation up 44.37%, utilities up 17.43%, and the composite index up 28.71%. U.S. government bond yields declined in 1997, with the bellwether 30-year Treasury bond falling below 6% for the first time since January 1996. The average yields began the year at about 6.8%, rose to 7.3% in April, and then began a steady slide, closing at 5.99% by the middle of December. Treasury prices rose sharply on October 27 in a very active session as panicked investors searched for security. Short-term securities were particularly popular. Corporate bond yields declined moderately during the year, with AAA bonds (the highest quality) at 6.95% in mid-October, down from 7.4% a year earlier. Private placements of bonds were being done at a record pace, with corporate issuers selling a record $138.5 billion of debt and preferred stock privately by October 1997, according to Securities Data Co.--far outpacing 1996's corresponding figure of $116 billion. These bonds were sold directly only to big institutional investors under the SEC Rule 144a guidelines. These private placements tended to dominate the junk-bond market. During the year the Chicago Board of Trade and the Chicago Board Options Exchange launched futures and futures options contracts that were pegged to the DJIA. Previous action on indexing had centred on the S&P 500, which had become a benchmark for institutional investors. S&P 500 futures, which were traded on the Chicago Mercantile Exchange (Merc), were among the most heavily traded futures contracts in the world. The panic on October 27 demonstrated the effectiveness of circuit breakers in the trading pits of the Merc, where four separate trading limits were imposed on the S&P 500 contract to slow down the frantic trading. The SEC was very active in 1997. It urged the marketplaces to move toward decimalization, which advocates contended would make stock prices easier to understand and would probably narrow the spread between bid and ask prices, saving investors money by enabling them to buy at lower and sell at higher prices. The SEC advised regulated companies and funds that they had to keep investors informed about the costs of adapting computer systems to handle the "year 2000 problem," as well as the potential legal liabilities associated with the necessary changes. Prospectuses and registration statements were to be reviewed for disclosure of these risks. The SEC also required disclosures about the policies used to account for derivatives and provide certain quantitative and qualitative information about market risk exposures. The circuit breakers, which were introduced in 1988, worked effectively during the October 27 frenzy, permitting orderly trading in the face of record volume. The SEC, the Commodity Futures Trading Commission, and the Bank of England formally agreed to step up their cooperation and keep one another better informed of regulatory matters involving multinational corporations. Canada. The Canadian stock market performed well in 1997 as the economy grew at a higher rate than had been forecast. There was an undercurrent of concern in the market because of the inflation threat, but share prices were well above those of the previous year. The weakness of the Canadian dollar led to persistent fears that the Bank of Canada would raise interest rates to protect the declining currency. In December the Canadian dollar fell below U.S. 70 cents for the first time in 11 years as a result of the financial turmoil in Asia and a showdown between currency traders and the Canadian central bank. The Bank of Canada raised its bank rate to 4% in November, its highest level in a year. Responding to the central bank's action, Canada's commercial banks raised their prime lending rates to 5.5%, up from 5.25%. The bank rate and prime rate were both raised again later to end the year at 4.5% and 6%, respectively. A report by the consulting firm KPMG Peat Marwick, which compared business costs to help companies consider where to locate, found that Canada had significant advantages as a result of low land prices and construction costs. Canada also had among the lowest labour costs, electricity prices, and telecommunications fees. In addition, it had among the lowest corporate income tax rates and interest-rate charges among the seven industrialized countries studied. Canada experienced robust economic growth and low interest rates in 1997 as fiscal and monetary policies promoted reductions in the government's heavy debt-service costs. Canadian corporate profits rose sharply during the year, propelled higher by the country's strong economy. Corporate profits rose by more than 20% compared with the figures for 1996. Market activity paralleled that of the American market. The leading indexes were up about 13% for the year, and the crash on October 27 resulted in a drop of 7.88%, with the Toronto Stock Exchange being shut down after the composite index of 300 stocks (TSE 300) lost 434.3 points, 6.12% of its value. The collapse of the gold-mining company Bre-X Minerals, which arose from the discovery of massive fraud (see BUSINESS AND INDUSTRY: Mining: Sidebar), caused the TSE computer system to break down owing to an overload of trading resulting from panic selling of the stock. The market made a speedy recovery, however, and moved on to establish new records. The TSE index of 300 stocks ended the year at 6699.44, up 13%. Canadian bond markets rallied in line with those of the U.S., even though the Bank of Canada indicated further tightening moves. At the end of September, the 10-year government yield was 5.85%. Interest rates declined steadily after March 1997. Mutual funds invested heavily in financial services, communications, and consumer stocks to profit from Canada's strong economic growth. There was less emphasis on mining and forestry stocks, but precious-metal and commodity-based stocks remained popular with mutual funds. United States. Consumer safety was an issue on several fronts in the United States in 1997. The year began with the National Highway Traffic Safety Administration (NHTSA) issuing a formal proposal--finalized in November--to allow car owners to have air bag on-off switches installed by auto dealers and repair shops. The NHTSA and the National Transportation Safety Board had reported in 1996 that air bags--mandated for both the driver and the passenger side of all new automobiles and light trucks--actually increased the risk of injury and death for children under 12 riding in the front seat during a frontal crash. Official data also revealed that despite a positive record overall, air bags showed small, sometimes negative, effectiveness in protecting the elderly and people of short stature. Automakers and the government quickly reached agreement on rules to implement air-bag-design changes for future model years to reduce these risks but stalled over the disconnect policy, which was intended to help affected populations in the more than 56 million air-bag-equipped vehicles already on the road. Opponents of an open disconnection policy feared many people would choose to deactivate air bags unnecessarily and thus increase their risks. A special White House commission to improve aviation safety and security issued 57 proposals in February following concerns raised in 1996 with the crash of TWA Flight 800 off Long Island, N.Y., and the ValueJet Flight 592 crash into the Florida Everglades. The far-reaching proposals covered aviation safety, air traffic control, airport security, and aviation disaster response. Some safety-regulation experts noted that the costs of certain measures, particularly airport security, would outstrip the benefits to the traveling public by a significant margin, given that the risks of flying were small. Meanwhile, the Federal Aviation Administration reported that publishing airline safety rankings, in the manner of on-time and complaint rankings already provided by the government, would not be helpful because there were "no consistent or persistent distinctions among the major jet carriers." Ongoing efforts to intensify food-safety oversight were underscored by a string of well-publicized foodborne-illness outbreaks, from tainted raspberries to bad apple cider to hamburger meat processed by the Hudson Foods Co. of Arkansas. (The latter led to Hudson's recall in August of some 11.3 million kg [25 million lb] of hamburger.) Key among several educational and regulatory initiatives were plans to extend the Hazard Analysis and Critical Control Point (HACCP) system of food inspection to cover fruit and vegetable juices. HACCP became fully effective in seafood plants at the end of 1997, and many large meat and poultry plants scheduled to implement HACCP fully by January 1998 already had the system in place. Initiatives also included expansion of the FoodNet monitoring system, which established a national network of "sentinel" sites in the states to provide early warning of food-illness outbreaks. Increased enforcement powers of federal meat and poultry inspectors and increased oversight of imported foods were proposed but eventually bogged down in Congress. After 10 years of lobbying, broadcasters persuaded the Federal Communications Commission (FCC) to begin the formal transition to the broadcast of digital television signals, which promised to revolutionize the quality of TV. The FCC decided that conventional broadcasts would be phased out by the year 2007. Against their will, however, broadcasters still had to choose precisely the type of digital signals to broadcast and thus were reluctant to choose one format, such as the long-promised "high definition television," over other digital formats until it was clear what competitors would do. This left consumers with the promise of great technological advance, the prospect of having to replace soon-to-be obsolete TV sets (within a year in some markets), and no assurance that near-term purchases would comply with the future standard. Consumers were more likely to find drug ads on television and radio broadcasts after the Food and Drug Administration issued new guidelines for advertising prescription drugs. Aimed at making such ads more consumer friendly, the guidelines said drugmakers could describe drug benefits without having to post the lengthy, detailed side-effect notices, as was required prior to the August ruling. Drug companies still had to summarize the major risks and include toll-free telephone numbers or Internet addresses for additional consumer information. Nevertheless, the Food and Drug Administration still was vigilant and warned one major drugmaker about misleading ads only a few days after issuing the new rules. PETER L. SPENCER See also Business and Industry Review: Advertising; Retailing; The Environment. Veterinary Medicine A global overview of animal health problems by the Office International des Epizooties (OIE) in 1997 surveyed progress in controlling major disease threats to the world's livestock population. Rinderpest was restricted to areas of sub-Saharan Africa, the Middle East, and India; a coordinated vaccination program aimed to eradicate the disease completely in the coming decade. Foot-and-mouth disease was eliminated or controlled in North America, southern South America, Europe, Oceania, Japan, and Southeast Asia. An outbreak in Taiwan, however, resulted in the slaughter of three million pigs. Contagious bovine pleuropneumonia remained a serious concern in Africa, where it was spreading to the south of the continent. Another cause for concern was classical swine fever, which reappeared in Europe. In The Netherlands economic losses resulting from the disease exceeded $250 million. Bovine tuberculosis was again seen in many regions, while the incidence of brucellosis in small ruminants and trypanosomiasis in cattle in Africa and horses in Asia and the Middle East was also creating problems. Rabies was being controlled in Western Europe as a result of an oral-vaccination campaign in foxes, but it continued to represent a growing threat in less-developed countries and in Eastern Europe. The number of suspected cases of bovine spongiform encephalopathy (BSE; "mad cow" disease) in Great Britain continued to fall. By the middle of 1997, the number of new cases reported each week had dropped to about 100 from a peak of 1,000 in 1993. About 80% of the cases were confirmed. The policy of culling all cattle over 30 months old, introduced in 1996 at the direction of the European Commission, resulted in the slaughter of 1.3 million cattle. A ban on British exports of beef and beef products remained in force, although progress was made toward lifting the ban on certified BSE-free herds where lifetime identity records had been maintained. Actuarial studies of the life-span expectancy and the causes of mortality in different breeds of dog were in their infancy. The increasing amount of insurance taken out for companion animals was, however, establishing a database from which patterns were beginning to emerge. A study of data on more than 220,000 Swedish dogs enrolled in life insurance programs analyzed rates of mortality and identified 25 breeds that had either consistently high or consistently low mortality. Large breeds generally tended to die earlier, with the Irish wolfhound topping the list; smaller breeds had much lower rates of mortality, with the incidence for the soft-coated wheaten terrier nine times less than for the Irish wolfhound. At the Roslin Institute, Edinburgh, researchers cloned a lamb from a single cell derived from the mammary gland of an adult sheep. The cell nucleus was implanted into an egg from another sheep and transferred to a third, which carried the embryo to full term and gave birth to a healthy lamb, named Dolly. A similar cloning technique was used to produce a transgenic lamb carrying a human gene for a therapeutic protein. This protein would be harvested from the milk of the adult sheep during lactation. After purification the protein could be used for therapeutic purposes. The technique was expected to facilitate the production of a range of proteins with specific medical applications, such as the treatment of cystic fibrosis. (See LIFE SCIENCES: Special Report.) Described as the largest small-animal congress ever held, a joint meeting of the World Small Animal Veterinary Association, the British Small Animal Veterinary Association, and the Federation of European Companion Animal Veterinary Associations at Birmingham, Eng., in April attracted an attendance of more than 6,700. The meeting paid particular attention to the potential of information technology for improving veterinary services. EDWARD BODEN See also Life Sciences: Molecular Biology. Social Protection Western Europe. High unemployment and an aging population continued to generate concern about the financial stability of Western Europe's social security programs. (See Spotlight: Europe's Crumbling Social Network.)In Spain, where unemployment hovered around 22%, the entire social protection system was overhauled, and business and labour leaders reached agreement on reforms that would foster the hiring of permanent, rather than part-time, employees. Social security benefits would be financed through payroll deductions, whereas other benefits would be paid for through general taxation. In addition, pensions would be calculated on the basis of the last 15 years rather than the last 8 years of a worker's base salary. Rising costs in health care led to reform in Austria, where the funding system for hospitals was completely redesigned. Payments made by the social insurance scheme for hospital treatment would be subject to an annual cap linked to future contributions. In addition, a new billing system was introduced whereby reimbursement would be based on the diagnosis rather than the type of hospital. A uniform hospital plan was also adopted, which led to the closing of certain hospitals or dep

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