This section briefly reviews members’ payments and countertrade arrangements among themselves, as well as regional associations. Although bilateral payments arrangements have declined since the 1960s and now account for a small fraction of world trade, countertradepractices have become far more commonplace. In the area of regional arrangements, significant developments affecting formal regional and bilateral arrangements for trade and finance have taken place, in particular in industrial countries and South America.
Bilateral Payments Arrangements and
percent of world trade—but estimates based on these figures imply implausibly rapid growth of countertrade since 1980.
Although the magnitude of trade conducted under countertrade arrangements is small in relation to world trade, the proliferation of such practices tends to undermine the operation of the multilateral system of trade and payments. Countertradepractices entail many of the undesirable restrictive and discriminatory practices traditionally associated with bilateralism. While, as already mentioned, countertradepractices may, in the short
liberalizing or tightening effect). The second section summarizes developments in exchange arrangements and the evolution of exchange rates; the third section highlights the main developments in restrictive payments and trade practices; and the fourth section describes developments in bilateral and regional arrangements and countertradepractices. 5
1 International Monetary Fund, World Economic Outlook, April 1989: A Survey by the Staff of the International Monetary Fund , World Economic and Financial Surveys (Washington, 1989).
2 For an account of trade
Czechoslovakia, Hungary, and Romania. A recent survey (Creative Countertrade by Kenton Eldurkin and Warren Norquist) cites countertrade laws or government policies in 30 other nations. Of the countries which mandate countertrade, all but China limit their requirements to government purchases. The least restrictive policy is New Zealand’s, which considers countertrade proposals only as a “tie-breaker” in government procurement when bidders submit proposals that are otherwise comparable.
Countertradepractices vary extensively among commodities. Offsets are frequently
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.
This chapter surveys major developments in Fund members’ restrictive practices affecting international trade and financial transactions. These practices take the form of either quantitative restrictions or price-related measures that involve implicit or explicit taxes and subsidies affecting international transactions. Most of the practices are described in detail in the country-specific reports that comprise the Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER).
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.
There are no international laws or agreements dealing directly with countertrade, but GATT provisions cover certain aspects of countertradepractices like subsidization, dumping, or discrimination. 74 While, the Fund has no jurisdiction over countertrade unless exchange restrictions are involved (such as in bilateral clearing arrangements), it is generally concerned with the increased use of countertrade because it undermines the multilateral character of the trade and payments system and imposes additional costs on the participants. The complexity of
, however, that countertrade has stagnated since 1984 and actually declined in 1987. These developments may reflect an increased recognition of the drawbacks of countertrade and the additional costs it imposes on exporters. Both the Fund and the GATT have been concerned with countertradepractices, not only because of their costs but also because they undermine multilateralism and inhibit efficient resource use.
Arguments for protection in developing countries rely heavily on balance of payments justifications. Over 85 percent of all quantitative restrictions notified
International Monetary Fund. External Relations Dept.
This paper highlights the sources of payments problems in less developed countries. Growth in the industrial countries has a direct impact on the current account of the developing countries through its influence on both the prices and volumes of their exports. An increase in the real effective exchange rate is clearly a fundamental determinant of a deteriorating current account since, other things being equal, it tends to raise domestic demand for imports and to reduce foreign demand for exports.