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International Monetary Fund. Independent Evaluation Office

Abstract

The Independent Evaluation Office (IEO) completed an evaluation of IMF Involvement in International Trade Policy Issues in 2009. The evaluation was published at a time when global trade was experiencing a historically unprecedented decline in the wake of the global financial crisis (GFC). This report updates the IEO’s 2009 study, covering the period from January 2010 to August 2019, examining the Fund’s reaction to the myriad developments that have reshaped the global trade system (GTS) over the last decade.

International Monetary Fund. Independent Evaluation Office

Abstract

The 2009 evaluation found that, starting in the early 2000s, the Fund had scaled back its involvement in trade policy issues for several reasons. Externally, these included a long period of growth in global trade and trade liberalization that had reduced interest in IMF advice and conditionality and the growing role of the WTO following its establishment in 1995. Internally, financial sector issues were demanding increasing attention at the Fund, the overall downsizing of the IMF had tightened the availability of resources, and the Executive Board (the Board) approved steps to streamline trade policy surveillance. In this context, the 2009 evaluation focused on five areas: (i) the IMF’s mandate and involvement on trade policy issues; (ii) the cooperation of the IMF with other international organizations; (iii) the guidance provided by the Board to staff; (iv) the adequacy of the IMF’s work on trade policies in both program and surveillance contexts; and (v) the effectiveness of IMF advice.

International Monetary Fund. Independent Evaluation Office

Abstract

The 2009 evaluation was published in the midst of the global financial crisis (GFC), and an associated sudden, severe, and synchronized collapse in international trade. After decades of strong growth in global trade, global trade volumes contracted by 12 percent in 2009, the largest such decline since World War II (WTO, 2010), notwithstanding commitments by G20 leaders to refrain from raising new barriers to investment or trade (Figure 1). Since then, as the global economy has regained its footing, trade has gradually recovered but overall has expanded much less rapidly than before the GFC, even after accounting for slower output growth. There has also been a striking shift in the country composition of trade, with rising importance of emerging market economies, particularly China.

International Monetary Fund. Independent Evaluation Office

Abstract

The consequences of all the changes summarized in Chapter 3 for the Fund’s engagement in trade policy have been both diverse and far-reaching. They have prompted new and increasing demands for research, surveillance, policy advice, advocacy, and technical assistance. In response, there has been a particular effort to scale up the Fund’s multilateral work on trade, in order to analyze the global consequences of trade tensions, highlight the benefits of open rules-based international trade, identify the costs of restrictive trade practices, and to champion multilateral approaches to trade. The Fund also has strengthened assessments of how trade affects domestic economies and employment patterns and revisited the issue of how changes in exchange rates affect trade prospects. All of these tasks have required the Fund to strengthen capacities to model both sectoral and aggregate impacts of bilateral trade policy changes and their spillover effects at bilateral, regional, and multilateral levels. There has also been increasing attention to ensure effective collaboration with international partners and to improve access to reliable data that adequately captures evolving trade patterns.

International Monetary Fund. Independent Evaluation Office

Abstract

The IMF deserves considerable credit for responding in an active and timely manner to the growing stresses on the multilateral trade system in recent years. Most of the recommendations of the 2009 evaluation have been implemented and the Fund has come to play a prominent role in championing a continued commitment to open, rules-based trade, in the face of pushback against globalization and increasing trade tensions. The institution is widely seen as a source of clear, consistent messages supported by high-quality analysis of the macroeconomic consequences of trade policy actions.

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 2008 saw the production of evaluation reports on “Structural Conditionality in IMF-Supported Programs” and “Governance of the IMF.” The Structural Conditionality report was discussed by the Board in FY2008, the Governance report in May 2008. FY2008 also saw Executive Board discussions related to the reports on “The IMF and Aid to Sub-Saharan Africa” and “IMF Exchange Rate Policy Advice.”

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.