It is indeed my pleasure to welcome you to this seminar on Trade Policy Issues organized by the IMF Institute, headed by Patrick de Fontenay, and the Policy Development and Review Department of the Fund, headed by Jack Boorman. I am very pleased that you have been able to take time from your busy schedules to come to Washington for this seminar.
On April 15, 1994 at Marrakesh, Morocco, more than one hundred countries signed the Final Act of the Uruguay Round. This marked the conclusion of a complex and protracted process of negotiations that began in September 1986 with the Punta del Este Declaration. The Uruguay Round was the eighth round of multilateral trade negotiations conducted within the framework of the General Agreement on Tariffs and Trade (GATT). Since its establishment in 1947, the GATT endeavored to achieve three principal objectives:
This paper provides a brief historical sketch of the evolution of the multilateral trading system since its creation, seeking to place the role of the Uruguay Round negotiations in that context, and a qualitative overview of some of the most salient points of the outcome of these negotiations.1 No economic evaluation of these results will be attempted here.
This paper addresses aspects of the Uruguay Round of particular concern to Africa. It covers four areas. First is preshipment inspection. This is an aspect of the Round about which little has been said and yet is one of some significance to African negotiators. Second is the erosion of preferences: the fear that, as most-favored-nation tariffs came down, the degree of preference that Africa received in markets of the Organization for Economic Cooperation and Development (OECD) would be reduced. This was perhaps the major concern expressed by African commentators. Third is the nontariff barriers affecting African exports and the abolition of the Multifiber Arrangement from an African viewpoint. Fourth is the effects of the liberalization of agriculture on food prices.
The architects of the postwar international economic order had foreseen the creation of three institutions: the International Monetary Fund (IMF), the World Bank, and the International Trade Organization (ITO). The IMF and the World Bank were established, but the ITO never came into existence. All that remained of the ITO was its chapter on commercial policy, which entered into effect for 23 countries in 1947 as the General Agreement on Tariffs and Trade (GATT).
The seminar has touched upon a number of issues, actually quite a wide range of issues, covering unilateral, regional, and multilateral aspects of trade policy. On unilateral trade liberalization, I think the seminar has spent some time on trade reform, and there I think the main issues identified were exchange rate policy, as well as sequencing. Then trade liberalization issues in industrial countries were covered, starting with the presentation by Professor Lawrence, who focused among other issues on the difference between what he calls “shallow integration,” which is a reduction of trade barriers at the border, and “deeper integration,” which is really an attempt to harmonize national differences in areas such as property rights and other issues.
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.
As Mr. Ouattara’s remarks have suggested, we in the Fund have been devoting increasing attention to structural reforms as a necessary complement to macroeconomic stabilization in the design of Fund-supported adjustment programs, and more generally in the advice that the Fund provides to member countries in the context of its surveillance responsibilities. Over recent years, in fact, the most successful Fund-supported adjustment programs have been those that have had a medium-term focus with corresponding emphasis on structural reforms, including in that context trade reforms, which are crucial. To further that effort, the Fund, the World Bank, and the new WTO must increasingly complement each other in assisting countries in their trade liberalization efforts. The Fund’s own perspective in such efforts is to integrate trade reform with comprehensive macroeconomic adjustment programs, taking account of the many links between trade and macroeconomic policies. We all know that inappropriate macroeconomic (including exchange rate) policies can constrain an economy’s ability to compete abroad and could also generate protectionist pressures at home. Trade policies, in turn, can affect macroeconomic policies through their impact on fiscal balances, on the balance of payments, and on the exchange rate. The fact is that exchange and trade restrictions often operate as substitutes, and progress in one area can be hampered by developments in the other.
This chapter describes the principal results of the GATT’s eighth round of negotiations, launched in Punta del Este, Uruguay, in September 1986, and concluded in Marrakesh, Morocco, in April 1994- The World Trade Organization (WTO), the principal result of the Uruguay Round, enters into force on January 1, 1995 and replaces the GATT as the basis for trade relations among its members. After an overview of the GATT system and a brief summary of changes in the framework for trade relations contained in the Uruguay Round agreements, the chapter concludes with a description of the steps a country must take to become a WTO member.