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International Monetary Fund. Independent Evaluation Office

Abstract

Trade policy occupies an unusual and at times problematic place in the work of the IMF. Though trade policies of IMF members have strong influences on macroeconomic stability, they are often seen as peripheral to the IMF’s core competency. This evaluation, which examines the IMF’s involvement in trade policy issues during 1996–2007, addresses five questions. What is the nature of the IMF’s mandate to cover trade policy? Did the IMF work effectively with other international organizations on trade policy issues? Did the Executive Board provide clear guidance to staff on the IMF’s role and approach to trade policy? How well did the IMF address trade policy issues through lending arrangements and surveillance? Was IMF advice effective? The evaluation finds that the IMF’s role in trade policy has evolved in some desirable and some less desirable ways and recommends how to use the limited resources the IMF can devote to trade policy to fill these gaps.

International Monetary Fund. Independent Evaluation Office

Abstract

This sixth Annual Report describes the activities of the Independent Evaluation Office (IEO) during the year to April 30, 2009. The report summarized the findings of IEO's most recent evaluations, lists cross-cutting lessons highlighted in previous years' reports, and discusses ongoing evaluation projects. The report also describes the new framework for monitoring and following up on the implementation of IEO recommendations approved by the IMF Executive Board.

International Monetary Fund. Independent Evaluation Office

Abstract

1. The IMF’s involvement in trade policy issues has been a source of controversy. In contrast to exchange rate, fiscal, or monetary policies, trade policy lies within the IMF’s domain through at most a soft mandate. This leaves substantial scope for disagreement on whether the IMF has overstepped its proper role on trade policy or not done enough. Also, reflecting an orientation toward removing barriers to trade, the IMF’s involvement in trade policy has stoked the debate on whether steps toward freer trade are always beneficial for a country or whether developmental objectives are better served by more gradual changes. Alongside this debate are charges that IMF advice has not been evenhanded and has pushed harder on developing countries (through lending arrangements) than on advanced countries to reduce protectionism. And with the increasing complexity of trade policy issues, questions have arisen about whether IMF staff have the expertise to address trade policies rigorously.

International Monetary Fund. Independent Evaluation Office

Abstract

The financial year 2009 saw the production of an evaluation on The IMF’s Approach to International Trade Policy Issues. The Governance of the IMF report was also discussed by the Board in FY2009, and there were discussions on follow-up to the IEO evaluation of Structural Conditionality in IMF-Supported Programs. This recently completed evaluation and follow-up to past evaluations will be discussed in Chapter 2.

International Monetary Fund. Independent Evaluation Office

Abstract

The report for the evaluation of IMF Involvement in International Trade Policy Issues was sent to the Executive Board for discussion in May 2009. The Executive Board discussed in FY2009 the report Governance of the IMF and the Management Implementation Plan for the evaluation of Structural Conditionality in IMF-Supported Programs. Both of these discussions were detailed in the FY2008 IEO Annual Report. This report outlines some of the Board’s subsequent discussions on the topic of IMF governance.

International Monetary Fund. Independent Evaluation Office

Abstract

5. The IMF’s mandate on trade policy issues is broad, but not precise.2 The root of the mandate lies in Article I(ii) which specifies that a purpose of the IMF is

International Monetary Fund. Independent Evaluation Office

Abstract

Previous IEO Annual Reports identified common themes emerging from earlier evaluations. The FY2007 Annual Report emphasized the need for:

International Monetary Fund. Independent Evaluation Office

Abstract

9. Interinstitutional cooperation is essential for the IMF to be effective on trade policy issues. Two aspects of the institutional landscape reinforce this point. First, since the IMF has few resources to devote to trade policy, it must look to organizations such as the World Bank and the Organization for Economic Cooperation and Development (OECD), even for the tools needed to address macroeconomic effects of trade policy. Second, the international community established the WTO as the locus of multilateral trade cooperation. The WTO, however, is primarily a negotiating forum, with limited capacity for taking views on how trade policies affect global, regional, or national macroeconomic vulnerabilities. Providing such views must fall to the IMF, which in turn must maintain coherence with the WTO’s framework.

International Monetary Fund. Independent Evaluation Office

Abstract

The IEO is currently completing the evaluation on The IMF’s Interactions with Its Member Countries. Work is starting on two evaluation projects, one looking at the IMF’s research and one assessing the Fund’s performance in the run-up to the current financial and economic crisis. Beyond these two projects, the selection of future topics will await the arrival of the next Director of the IEO. Table 1 shows the status of IEO evaluations completed or in progress.

International Monetary Fund. Independent Evaluation Office

Abstract

20. Executive Board guidance on trade policy since the mid-1990s pushed staff both to broaden the range of issues they covered and to be more selective.5 Discussing the 1994 Comprehensive Trade Paper (an IMF staff review of trade policy issues that was conducted every few years until 1994), Directors asked for more analysis of several issues: macroeconomic effects of trade policies; spillovers, especially from PTAs; and effects of the Uruguay Round, especially on net food importers and countries facing preference erosion. In later years, the Board also asked for staff attention to countries’ positions in the Doha Round, market access for developing country exports, and trade in services. But staff interviewed for the evaluation saw the Board’s decision to abandon the Comprehensive Trade Paper as a sign of reduced interest in trade issues. This perception was reinforced by the streamlining of structural conditionality in 2000 and of trade policy surveillance in 2002. Also, as criteria for streamlining trade advice emerged only gradually through 2005, staff were often unclear when to address issues.