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.
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.
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 paper gives you an overview of the main topics that we are going to discuss during the week, against the backdrop of recent developments in the world trading system. A number of these issues will be discussed in more detail in subsequent papers.
I would like today to discuss selected issues in the design and implementation of trade reforms based on our experience with adjustment programs supported by the use of Fund resources. It would be useful at the outset to examine the recent record on adoption of trade reform measures in developing countries and in economies in transition. We surveyed 78 Fund-supported programs with 59 countries approved in 1990–93 under Stand-By Arrangements, the Extended Fund Facility (EFF), the Structural Adjustment Facility (SAF), and the Enhanced Structural Adjustment Facility (ESAF).1 Measuring trade regimes, especially quantitative restrictions (QRs), across such a large group of countries is rather difficult. The assessment of QRs was based on the import and export coverage and the intensity of the respective QRs. The tariff regime was specified in terms of average tariff levels inclusive of various other duties and charges that add to the cost of imports. The tariff and QR regime was combined to provide an indication of the overall trade policy stance. Countries were ranked in terms of whether their trade regimes were relatively open, moderately restricted, or very restricted.
India embarked on a comprehensive economic reform program in mid-1991. The external trade sector became the focus for substantive liberalization from the very beginning of the reform process. As a result, substantial progress has been achieved in this sector during the last three and a half years. This paper, which appraises this period, is divided into three sections. The first provides the background against which the reforms were initiated. The second deals with the major policy initiatives and an appraisal of their impact. The third is devoted to the issues and policy dilemmas faced in designing and implementing the trade policy reform package.