This paper summarizes major measures taken in the international exchange and trade systems in 1988 and developments in exchange arrangements and the evolution of exchange rates. The exchange arrangements adopted by members since 1973 cover a broad spectrum of degrees of flexibility, from single-currency pegs to a freely floating system. Most countries have adopted arrangements that fall clearly into one or another of the major categories of the present classification system adopted by the IMF in 1982, and countries with dual markets usually have one market that is clearly more important than the other, which allows accurate classification by major market. Changes in IMF members' arrangements for their currencies during this decade have shown a distinct tendency to move toward more flexible arrangements and away from single-currency pegs, continuing a trend that began in the mid-1970s. A qualitative sense of the significance of the trend toward more flexible arrangements can be conveyed by the degree that world trade is affected by countries adopting different arrangements.
This paper reviews major issues and developments in the trade area and outlines the challenges governments face as they seek to liberalize trade in the Uruguay Round of trade negotiations and address new trade issues. In industrial countries, the reorientation of policies was most apparent in steps taken to liberalize financial markets and foreign direct investment, privatize public enterprises, and deregulate services, particularly in the transportation and communication sectors. Among developing countries, a growing number recognized the merits of outward, market-oriented policies and took steps to liberalize their trade regimes and open their economies to international competition. By and large, the increased focus on market principles in industrial countries did not carry over to trade and industrial policies or, most notable, to the agricultural sector. Despite strong growth performance in 1983–1989, little progress was made in rolling back the protective barriers that had risen during the preceding recessionary period; protection persists in agriculture and declining sectors and has spread to newer high-tech areas.
The Final Act of the Uruguay Round was signed in Marrakesh in April 1994, bringing to a conclusion the eighth and most ambitious set of multilateral trade negotiations. One hundred and twenty-five countries participated in the Round, which will reduce tariff and nontariff barriers to trade in goods, strengthen trade rules and extend multilateral rules to new areas—services and intellectual property—and establish the World Trade Organization. Developing countries participated more actively in the negotiations than hitherto and will be more fully integrated into the multilateral trading system after the Round. This paper investigates the economic implications of these different aspects of the Uruguay Round on industrial, developing, and transition economies, based on information available at the time of preparation of the paper. A quick reference guide to the Round provides a synopsis of the main results (Appendix I) and should be read in conjunction with individual sections below.
This paper reviews recent developments and issues in trade and trade-related policies of the industrial. Eastern European, and developing countries, focusing primarily on the period since the most recent occasional paper prepared in 1988.1 The paper is organized as follows. Section I reviews the international economic environment and describes briefly the recent developments in trade policy. Section II describes recent trade trends in industrial and developing countries against which developments in trade policies are analyzed. Sections III, IV, and V review developments and issues in trade policy for the industrial, Eastern European, and developing countries, respectively. Section VI provides more detailed coverage of trade-related policies in the agricultural sector and surveys the empirical evidence on the costs of protection and the possible effects of trade liberalization in this sector. Section VII provides an overview of the issues that will be central to the trade policy discussions of the 1990s. Appendix I reviews activities of the General Agreement on Tariffs and Trade (GATT). Appendix II surveys the relationship between trade and competition policies. Appendix III discusses some of the methodological issues involved in measuring the incidence and effects of nontariff barriers, looks at estimates of the costs of protection in selected industrial sectors affected by nontariff barriers, and compares the results of researchers’ efforts to estimate the possible gains from multilateral trade liberalization.
This study emerges from the compilation of the International Monetary Fund’s Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER), which has been published since 1950. These country-specific reports, including the 1989 edition, which serves as the background document for the present study, are prepared in accordance with the provisions of Article XIV, Section 3, of the Fund’s Articles of Agreement. They inform the Fund membership and public of the current status of exchange rate arrangements and the restrictive systems for trade and payments in Fund member countries. Using basic information compiled by the Fund staff, this study identifies trends and reviews major developments underlying topical issues in the system of financial and trade linkages between countries. The emphasis is on recent major policy actions of trading and financial nations that have systemic consequences. By its nature, the study stresses institutional rather than quantitative evidence in support of its findings.
As noted in Section I, the Fund’s Articles of Agreement state broad aims for members’ exchange rate policies and arrangements. However, each member selects its own regime, while the Fund is enjoined to “exercise firm surveillance” over these policies (Article IV). The Fund, in a document entitled “Surveillance Over Exchange Rate Policies” issued in 1977,6 gives members further guidance in setting exchange rate policies; broadly, members should avoid manipulating exchange rates or the international monetary system, they should intervene in the market if necessary to counter disorderly conditions, and when they do so, they should take into account the interests of other members.
The sustained recovery in economic growth following the 1981–82 recession was accompanied by a rapid expansion of trade (Chart 1) and a further integration of the world economy; for the 1980s as a whole, the growth of world trade exceeded output by 50 percent. Economic performance varied among the major groups of countries: Asia experienced the most rapid growth of output and exports since 1983, followed by North America, and Western Europe; the other developing countries fared less well. The Asian region also experienced the most rapid growth of intraregional trade in recent years (Table 1). The growth of output and trade slowed in 1990–91, in part reflecting the recession in North America and the United Kingdom; however, in contrast to 1981–82, demand pressures remained strong in Germany and Japan. Among the major industrial countries, a notable development was the rapid growth of U.S. export volumes after 1985 and the slower growth in Japan’s export volumes, owing to exchange rate movements and shifts in relative cyclical positions (Table A1).
Trade reforms are being increasingly featured in the design of adjustment programs supported by Fund resources. This paper reviews the trade policy content of Fund-supported programs approved in the period 1990–93.2
Antidumping is by far the most frequently used (GATT-legal) instrument of administered or contingent protection2 among industrial countries, and its use has been spreading in recent years with developing countries, and some transition countries, taking an increasing interest in formal antidumping measures. Whether antidumping is a problem or a solution in the multilateral trading system depends on what countries aim to achieve through antidumping policies, whether it is an appropriate instrument to achieve these objectives, and whether the benefits appear to justify the implied social costs.
Since the mid-1980s, there has been little, if any, decline in the overall level of trade protection in industrial countries despite the expansion of output and trade, the reduction in current account imbalances among the major industrial countries, and the ongoing Uruguay Round of multilateral trade negotiations. Protection persists in agriculture and in declining industries, and new pressures have emerged for government intervention in sectors considered “strategic.” The limited progress in addressing the long-standing problems in agriculture and declining industrial sectors will intensify adjustment pressures in the industrial countries as the European single-market program progresses, the developing countries continue to expand and diversify exports, and the Eastern European countries seek to reintegrate their economies into the multilateral trade system.