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.
International Monetary Fund. External Relations Dept.
This paper highlights that the IMF, as Trustee for the Trust Fund, held the first of its series of gold auctions on June 2, 1976, with the sale of 780,000 ounces of gold—the total amount offered—at a common price of US$126.00 a fine ounce. The first gold auction was a success from the point of view of both the market and the IMF. In all, a total of 25 million ounces of gold from the IMF’s holdings will be sold at auction over a four-year period.
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International Monetary Fund. Monetary and Capital Markets Department
Near-term global financial stability risks have been contained as an unprecedented policy response to the coronavirus (COVID-19) pandemic has helped avert a financial meltdown and maintain the flow of credit to the economy. For the first time, many emerging market central banks have launched asset purchase programs to support the smooth functioning of financial markets and the overall economy. But the outlook remains highly uncertain, and vulnerabilities are rising, representing potential headwinds to recovery. The report presents an assessment of the real-financial disconnect, as well as forward-looking analysis of nonfinancial firms, banks, and emerging market capital flows. After the outbreak, firms’ cash flows were adversely affected as economic activity declined sharply. More vulnerable firms—those with weaker solvency and liquidity positions and smaller size—experienced greater financial stress than their peers in the early stages of the crisis. As the crisis unfolds, corporate liquidity pressures may morph into insolvencies, especially if the recovery is delayed. Small and medium-sized enterprises (SMEs) are more vulnerable than large firms with access to capital markets. Although the global banking system is well capitalized, some banking systems may experience capital shortfalls in an adverse scenario, even with the currently deployed policy measures. The report also assesses the pandemic’s impact on firms’ environmental performance to gauge the extent to which the crisis may result in a reversal of the gains posted in recent years.
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.
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).
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.
Following a two-year long recession, a gradual recovery of St. Kitts and Nevis’ highly indebted economy is under way. The government has shown remarkable resolve in pursuing fiscal consolidation. Notwithstanding the fiscal adjustment, a comprehensive and timely public debt restructuring is critical for the program to be fully financed and to achieve debt sustainability. Available financial sector indicators point to a well-capitalized banking system. Regulation of the non-bank financial sector has been strengthened, but continued efforts are needed to ensure effective supervision.
The paper presents a model of optimum currency areas using a general equilibrium approach with regionally differentiated goods. The choice of a currency union depends upon the size of the underlying disturbances, the correlation between these disturbances, the costs of transactions across currencies, factor mobility across regions, and the interrelationships between demand for different goods. It is found that, while a currency union can raise the welfare of the regions within the union, it unambiguously lowers welfare for those outside the union. [JEL F33, F36]