Abstract

This study asseses trade liberalization in programs supported by the IMF by reviewing multiyear arrangements in the 1990s and six detailed case studies. It also discusses the main economic factors affecting trade policy targets.

© 1998 International Monetary Fund

Cataloging-in-Publication Data

Trade liberalization in IMF-supported programs / prepared by a staff team led by Rober Sharer with Piritta Sorsa … [et al.]. — Washington, DC: International Monetary Fund

p. cm. — (World economic and financial surveys, ISSN 0258-7440)

Includes bibliographical references.

ISBN 9781557757074

1. Commercial policy. 2. Free trade. 3. International Monetary Fund. I. Sharer, Rober L. II. Sorsa, Piritta, 1955-III Series. HF1411.T73 1998

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Contents

  • Preface

  • List of Abbreviations

    • I. Introduction

    • II. Analytical Framework and Elements of Trade Reform

      • Elements of Trade Liberalization

      • Transparency, Governance, and Political Economy

    • III. Review of Fund Arrangements and Assessment of Overall Results

      • Methodology

      • Review of Multiyear Fund-Supported Programs, 1990–96

      • Targeting, Monitoring, and Overall Results

      • Program Ambitiousness

      • Factors Influencing Implementation of Trade Reform

    • IV. Case Studies of Trade Policy in Fund-Supported Programs

      • Trade Liberalization in the 1990s

      • Evolution of Program Targets During the Design and Negotiation Stages

      • Factors Influencing Implementation of Trade Reform

      • Lessons from Successful Liberalizers

    • V. Conclusions

  • Appendix I Methodology

  • Appendix II Summary of the Detailed Case Studies

  • Bibliography

  • Boxes Section

    • I. 1. The Roles of the Fund, the WTO, and the World Bank in Trade Policy

    • II. 2. Trade and Growth

    • 3. Political Economy and Trade Reform

    • III. 4. Trade Reform in the Baltics, Russia and Other Countries of the Former Soviet Union

    • 5. Trade Policies in Selected “Good Practice” Countries

    • 6. Regional Trading Arrangements

  • Tables Section

    • III. 1. Arrangements Included in the Review of Fund-Supported Programs

    • 2. Initial Overall Rating and Targeted Change in Restrictiveness Rating

    • 3. Ambitiousness of Programs Reviewed

    • 4. Fiscal Impact of Trade Reform Elements

    • IV. 5. Targeted Trade Reform in Fund Programs for Case Study Countries

    • 6. Changes in Trade Restrictiveness Ratings in Case Study Countries During the 1990s

    • 7. Factors Cited as Influencing Trade Reform for Case Study Countries

    • 8. Fiscal Indicators in Countries Where Fiscal Factors Were Cited as Influencing Program Design

    • 9. Case Study Fiscal and Balance of Payments Information

    • 10. Existence of Policies to Reduce the Fiscal Impact of Trade Reform In Programs Citing Fiscal Concerns

    • 11. Nature of Trade Conditionality for Case Study Countries

  • Appendix

    • I 12. Classification Scheme for Overall Trade Restrictiveness

    • 13. Classification Scheme for Tariff Restrictiveness

    • 14. Classification Scheme for NTB Restrictiveness

    • 15. Overall Classification Scheme Used in the Study by Kirmani and Others

    • II 16. Bangladesh: Restrictiveness of Trade Regime

    • 17. Egypt: Restrictiveness of Trade Regime

    • 18. Hungary: Restrictiveness of Trade Regime

    • 19. Sri Lanka: Restrictiveness of Trade Regime

    • 20. Zambia: Restrictiveness of Trade Regime

    • 21. Zimbabwe: Restrictiveness of Trade Regime

  • Figures Section

    • III 1. Distribution of Overall Restrictiveness, Initial Conditions

    • 2. Targeted Change in Overall Restrictiveness

    • 3. Initial, Targeted, and Final Distribution of Overall Trade Restrictiveness

    • 4. Overall Trade Liberalization, Final Outcome versus Program Objectives

    • 5. Monitoring Instruments Used in Fund Programs

    • 6. Trade Policies in Selected “Good Practice” Countries

    • 7. Initial Fiscal Indicators for the Programs Reviewed

    • 8. Arrangements Included in the Review

    • IV 9. Case Study Countries: Ratings of Trade Regime Restrictiveness

The following symbols have been used throughout this volume:

  • … to indicate that data are not available;

  • — to indicate that the figure is zero or less than half the final digit shown, or that the item does not exist;

  • - between years or months (for example, 1995-96 or January-June) to indicate the years or months covered, including the beginning and ending years or months;

  • / between years (for example, 1995/96) to indicate a fiscal or financial year.

“Billion” means a thousand million; “trillion” means a thousand billion.

“Basis points” refer to hundredths of 1 percentage point (for example, 25 basis points are equivalent to ¼ of 1 percentage point).

“n.a.” means not applicable.

Minor discrepancies between constituent figures and totals are due to rounding.

As used in this volume the term “country” does not in all cases refer to a territorial entity that is a state as understood by international law and practice. As used here, the term also covers some territorial entities that are not states but for which statistical data are maintained on a separate and independent basis.

Preface

This study assesses trade liberalization in programs supported by the International Monetary Fund based on a review of multiyear arrangements in the 1990s and on six detailed case studies. The review compares the initial degree of restrictiveness of each country’s trade regime, each program’s trade liberalization objectives, and the degree of trade restrictiveness at the end of the program. It then discusses the main economic factors affecting trade policy targets, including in particular the impact of fiscal considerations. The case studies extend this effort to program design and negotiation, and the key factors relevant to implementation.

The study was prepared in the Trade Policy Division of the Policy Development and Review Department (PDR) of the Fund. The principal authors of the study are Robert Sharer, Division Chief; Piritta Sorsa, Deputy Division Chief; Nur Calika, Paul Ross, and Clinton Shiells, Senior Economists; and Thomas Dorsey, Economist. Valuable inputs were provided for the study by Kamau Thugge, Senior Economist; Inutu Lukonga, Bradley McDonald, Leslie Teo, Nicholas Tsaveas, and Ricardo Velloso, all Economists; and Dustin Smith, Research Assistant.

The authors are indebted to Jack Boorman, Director, and Oleh Havrylyshyn, at the time Assistant Director (PDR), for their guidance in preparation of the study. Acknowledgment is due to numerous colleagues in the Fund for their willingness to exchange views and provide information, and to Professor Anne Krueger for helpful comments. The authors are grateful to Juanita Roushdy of the External Affairs Department for editing the manuscript and coordinating production of the publication and to Mary Joanne Marquez and Shirley Davies for expert word-processing assistance. The authors alone are responsible for the study; any opinions expressed are theirs and do not necessarily reflect the views of the Fund.

List of Abbreviations

CBI

Cross-Border Initiative

CEFTA

Central European Free Trade Agreement

CMEA

Council for Mutual Economic Assistance

Comesa

Common Market for Eastern and Southern Africa

EFF

Extended Fund Facility

ERS

Export retention scheme

ESAF

Enhanced Structural Adjustment Facility

EU

European Union

FTA

Free trade area

GATT

General Agreement on Tariffs and Trade

GDP

Gross domestic product

IMF

International Monetary Fund

ISAC

Industrial sector adjustment credit

MFN

Most favored nation

NTB

Nontariff barrier

OGIL

Open general import license

QR

Quantitative restriction

RAP

Rights Accumulation Program

RTA

Regional trading arrangement

SAF

Structural Adjustment Facility

SAL

Structural Adjustment Loan

UNCTAD

United Nations Conference on Trade and Development

UR

Uruguay Round

VAT

Value-added tax

WTO

World Trade Organization

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