II. Main Developments in Restrictive Practices

International Monetary Fund. External Relations Dept.
Published Date:
September 1978
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1. Imports and Import Payments

a. Quantitative Import Controls

The slow recovery of the world economy during the period under review was accompanied by a continuation of the trend, noted in last year’s Report, toward increased reliance on trade restrictions. The maintenance of existing and the application of new quantitative restraints on imports were often related to continued changes in the international competitiveness of individual local industries. Measures to limit imports during the period were in many cases aimed at specific commodities, especially in the sectors of steel, textiles, consumer durables, and shipbuilding. Individual import restraint actions were applied globally or on the basis of origin.

The EEC7 introduced prior authorization requirements for imports of a wide range of textile products, pending the conclusion of bilateral agreements with the third countries concerned; in June 1977, agreements on these items were reached with Thailand and Yugoslavia. Quota limitations on textile imports from specified sources were also imposed by individual members of the EEC: France took steps to limit the volume of textile imports from India and Korea; and the Benelux countries8 introduced quotas on cotton fabrics and dresses from Egypt, India, Macao, Morocco, Singapore, and Tunisia. In addition to placing quantitative limits on imports of television sets from Korea, the United Kingdom introduced quotas on imports of various clothing items from Pakistan and the Philippines, following consultations under Article III of the Multifiber Arrangement (MFA)9 of the General Agreement on Tariffs and Trade (GATT); imports of undergarments from Brazil and Spain into the United Kingdom were also restricted. Other import restricting measures by the EEC countries included those relating to items of Japanese origin. Thus, pending the conclusion of bilateral discussions aimed at reducing Japan’s trade surplus with the EEC, Italy introduced a quota on imports of certain makes of motorcycles from that country.

In a number of European countries, however, there was an easing of quantitative import restrictions. Norway waived licensing requirements for textile imports originating in or channeled through the EEC and the European Free Trade Association (EFTA),10 and Sweden abolished surveillance licensing of imports of textiles and other specified goods from the EEC and the EFTA. Iceland lifted import controls on television sets and certain food items, while Spain and Yugoslavia raised the import quotas on several specified consumer goods, including pharmaceuticals. In several other nonindustrial countries of Europe, on the other hand, quantitative restrictions were tightened. Malta introduced licensing requirements and quotas on imports of a wide range of commodities, including telegraphic equipment, adding machines, and timber; temporary prohibitions were also imposed on several other items such as luxury automobiles, cigarettes, fresh meat, and pesticides. In Portugal, quotas were introduced on a list of commodities accounting for about 7 per cent of 1976 imports, including foodstuffs, domestic appliances, and automobiles; in addition, all import items covered by Portugal’s advance import deposit requirement became subject to prior authorization. Turkey took steps to prohibit imports of luxury automobiles.

In December 1977, the U.S. authorities announced a five-point plan aimed at strengthening the domestic steel industry, including a trigger price mechanism to monitor imports of steel mill products. This mechanism is intended to enable the U.S. authorities to identify steel imports which appear to be priced below “fair value” under the U.S. Antidumping Act, and to determine on an expedited basis whether such sales are in fact below fair value. The trigger prices are based on costs of production in Japan, considered at present to be the most efficient producer of these products.11 The first list of such prices was published in February 1978. With respect to other products, import control measures in the United States also included bilateral export restraint agreements with individual trading partners. Exporting countries with which the United States concluded such agreements during the period under review, included the Republic of China with respect to footwear and color television sets, Hong Kong with respect to textiles, Korea with respect to footwear, textiles, and color television sets, and Japan as regards color television sets. After taking steps in October 1976 to substitute for the remainder of the year import quotas on meat items for the export restraint agreement with major meat exporters, the United States on January 1, 1977, renewed the export restraint agreement. The U.S. authorities eased quota limits on specified specialty steel products, and authorized additional exports of certain steel products by EEC countries to the United States after March 25, 1977.

Invoking the safeguard provision of Article XIX of the GATT, Canada introduced in 1976 global import quotas on certain clothing items and on one type of acrylic yarn. These measures were maintained in 1977. A further global import quota under Article XIV of the GATT was introduced for a two-year period in April 1977 on double-knit fabrics. Additionally, under the Arrangements Regarding International Trade in Textiles, restraints were implemented on imports of specified fabrics and household textiles from selected low-cost suppliers which had been determined to be injuring domestic manufacturers. Imports of footwear from all sources were placed under global quota in December 1977 for a three-year period.12

Within the group of more developed primary producing countries, Australia reimposed the quota which had been lifted at the end of 1976 on imports of automobiles, but eased quotas on certain knitted fabrics and paper products. New Zealand shifted several items to a restricted list requiring individual import licenses, and prohibited a number of import items, including blankets, rugs, and secondhand clothing. South Africa announced that merchants wishing to import capital goods must provide proof that the items concerned were unavailable in the domestic market and were required only to replace depleted stocks.

Significant steps to liberalize quantitative import restrictions were taken by a number of developing countries, including India, Lebanon, Mexico, and Sri Lanka. Reflecting a marked strengthening in its external reserve position, India shifted a wide range of commodities to the free import list, and took steps to liberalize the import licensing system. In Lebanon licensing requirements were abolished on all but a few items, including certain textile and agricultural products. Mexico abolished import licensing requirements for items in over 2,000 tariff headings. Under a major program to liberalize its exchange and trade system, Sri Lanka abolished prior licensing requirements with the exception of a small list of commodities. Among other countries, Argentina continued its program of import liberalization and lifted the prohibition on certain items, including cigarettes and tractors; Brazil removed a number of items from the list of suspended imports; and Chile abolished prior certification requirements as a condition for import registration at the Central Bank. Colombia transferred a large number of import categories from the list of goods requiring prior licensing to the freely importable list; however, imports of certain types of automobiles were prohibited. Ghana relaxed import licensing requirements in respect of firms producing basic domestic consumer goods or for export, and Pakistan introduced some liberalization of controls within the framework of the import program for 1977/78, including a doubling of the import allowance for spare parts. Quantitative import controls were intensified, however, in several developing countries, notably Guyana, Jamaica, Morocco, and Nigeria. Following the suspension until mid-January 1977, of the issuance of licenses for all nonemergency imports, Guyana introduced a licensing system based on the availability of foreign exchange. In Jamaica, some 128 import items were placed on the prohibited list, while 9 others became subject to specific licenses. The 1978 import program in Morocco entailed a shift of a large number of imports from the liberalized to the licensed category and a few imports were prohibited. The importation of a wide range of products was either prohibited or made subject to specific licensing in Nigeria. Among other developing countries, the list of prohibited or suspended imports was expanded in Bolivia, Fiji, Madagascar, Tanzania, and Thailand, while Iran, the Libyan Arab Jamahiriya, Mauritius, and Zaïre enlarged the list of import items subject to prior authorization.

b. Import Surcharges and Import Taxation

Several countries abolished or substantially curtailed their reliance on import surcharges as a means of import control. In Israel, the import surcharge which had been in existence since 1970 was abolished in October 1977 as part of a comprehensive reform of the exchange and trade system. Spain removed the 20 per cent surcharge which had been introduced in 1976 on items comprising 40 per cent of annual imports in that year. Uruguay introduced a number of measures to reduce the impact of existing import surcharge measures, including the elimination of the 7 per cent emergency surtax introduced in December 1975, the lowering of the remaining surcharges to a maximum rate of 90 per cent, and the extension until December 1977 of the import surcharge exemptions granted to certain local industries; however, certain goods, previously exempted, became subject to the minimum surcharge of 10 per cent. Bolivia, the Netherlands Antilles, and Yugoslavia also took steps to exempt imports by certain local industries from the prevailing surcharges; in Yugoslavia, however, the import surcharge scheme was again extended, until the end of 1977.

There was an increased reliance on import surcharges by a number of member countries. Bolivia extended existing import surcharges to a wide range of goods, and Canada imposed a surcharge on certain imports from the Republic of China. In Cyprus, a 2 per cent surcharge was levied on all imports except foodstuffs, pharmaceuticals, and imports by the government sector. In Portugal, the import surcharge on luxury goods applying to about 2 per cent of Portugal’s imports in 1976 was increased from 30 per cent to 60 per cent; in May 1978, however, Portugal announced that it would phase out the 30 per cent surcharge applying to about 29 per cent of 1976 imports. Senegal introduced a 25 per cent surtax on imports of automobiles. With the exception of the so-called bound items within the framework of the GATT, imports into South Africa became subject to a 15 per cent surcharge; the surcharge was later reduced to 12.5 per cent. In addition to expanding the coverage of the existing surcharge of 30 per cent on textile imports, Thailand introduced surcharges of 10–50 per cent on a few other items.

The tariff harmonization between the original six members of the EEC and the United Kingdom, Denmark, and Ireland was completed in July 1977. At the same time, most tariffs (except for those on agricultural products and some industrial items) between the EEC and the EFTA, including its associate member Finland, were reduced to zero. The United States in April 1977 raised from 9 per cent to 20 per cent the “entry bond” required to be posted by importers of Japanese color television sets, as a means of covering potential countervailing duties. Canada withdrew the preferential tariff treatment previously accorded until 1979 to imports of certain types of color television sets from the United Kingdom. Among other countries, Argentina lowered tariffs on a wide range of imports and in Chile, general tariff reductions were made on three occasions as part of a program to reduce all import tariffs to a uniform level of 10 per cent by mid-1979. Selective import tariff reductions were made in several countries, such as Ghana and India. Selective increases in import tariffs were introduced in a number of other countries, including Australia, the Dominican Republic, Malawi, Pakistan, and Sierra Leone.

Within the framework of the Generalized System of Tariff Preferences (GSP), several industrial countries introduced further tariff concessions for imports from developing countries. The EEC countries added a number of tropical products to their coverage of the GSP, and introduced, inter alia, special concessions in favor of the least developed countries. While granting duty-free treatment to some 121 items under the GSP scheme, the United States withdrew about 115 other items from this scheme. In Norway, several products were added to the duty-free list under the GSP scheme, and more countries were also made eligible for the scheme, including Angola, Cape Verde, Mozambique, Romania, and São Tomé and Principe. Canada announced the reduction or elimination of duties on a most-favored-nation basis or on a preferential basis under the general preferential tariff in respect of certain imports from developing countries.

c. Advance Import Deposits

During the period under review, member countries, on balance, appear to have reduced their reliance on advance import deposit schemes. Several countries abolished prior import deposit requirements; in Portugal, South Africa, and Zaïre, elimination of the requirements was effected in the context of policy programs related to the use of Fund resources. Among other countries, Brazil exempted a number of items from the prior import deposit requirement. Colombia introduced a payment deposit scheme as a condition for obtaining exchange licenses, but granted some exemptions from the existing prior import deposit scheme. In El Salvador, the coverage of the prevailing 100 per cent advance deposit scheme was reduced from 7 per cent to 4 per cent of annual imports. The percentage of required prior margin deposits for certain imports was reduced in Ghana. In Greece, the authorities terminated the advance import deposit scheme in respect of several products, amounting to an 8 per cent reduction in the commodity coverage of the scheme. Finland reduced the coverage of its advance import deposit scheme from 35 per cent to 30 per cent of total imports. In Yugoslavia, the authorities allowed the prior import deposit scheme on certain items to lapse, as scheduled, in February 1977.

A few other countries introduced new or increased existing advance deposit requirements for imports. Early in 1977, Indonesia introduced a 100 per cent advance import deposit for certain imports; it also imposed a 100 per cent guarantee deposit and a 100 per cent advance payment of import duties for imports where domestic demand was judged to have been met. A prior import deposit scheme was introduced in Mauritius, while New Zealand on two occasions extended for six additional months, the advance import deposit scheme which was previously scheduled to expire in February 1977; the scheme was suspended in February 1978. Nigeria in April 1978 introduced a compulsory advance deposit requirement on letters of credit for all imports except raw materials, capital goods, and food items. Turkey introduced substantial increases in the guarantee deposits in respect of certain import items.

d. Other Measures Affecting Import Payments

Several member countries relaxed official regulations on the terms of import payments. In Japan, the authorities increased the limit on payments for imports that could be made without verification by the banks, relaxed requirements on the standard method of import settlement, and introduced a scheme providing for import financing in certain cases at prime interest rates. Other countries which took steps to liberalize regulations on import payments included Argentina, Bangladesh, Colombia, Denmark, India, Nepal, Portugal, Spain, and Uruguay.

There was a tightening of regulations on import payments in several countries. The Dominican Republic reduced the list of items eligible for financing through the banking system, thereby requiring such imports to be financed with importers’ own foreign exchange. Indonesia introduced regulations requiring sight letters of credit for all private imports, although early in 1978 this regulation was liberalized. Nigeria strengthened the documentation requirements and general administrative controls in respect of letters of credit, sight payments, and bills for collection for imports of plant, machinery, and equipment. The Philippines abolished prior approval requirements for some import items, but extended such requirements to other import items. The United Arab Emirates introduced, and the Yemen Arab Republic increased, cash margin requirements in connection with the opening of import letters of credit.

The period covered by this Report witnessed the elimination of commercial payments arrears in the Dominican Republic, Egypt, and Sierra Leone. Payments arrears declined in Uganda, which adopted the practice of setting aside funds on a monthly basis to effect reductions in arrears. Outstanding arrears increased in Zaïre and Zambia. In the former country, commercial banks were required to transfer all import payments arrears to the Bank of Zaïre; a similar practice was introduced in Zambia. In Ghana arrears on import payments, which had been eliminated by the end of 1975, re-emerged toward the end of 1976. Guinea-Bissau also continued to have arrears. In several countries, namely, Guyana, Jamaica, Sudan, and Turkey, payments arrears emerged during the period covered by this Report. In connection with programs in support of the use of Fund resources by Turkey and Zambia, provision was made for the phasing out of payments arrears.

e. State Trading

The scope for foreign trade by official entities was noticeably reduced in some countries, but widened in others. India placed on open general license, a large number of import items hitherto handled by official agencies, and Pakistan also reduced the scope of state trading. Sri Lanka terminated import monopolies previously held by several state enterprises, and appreciably reduced state control over external trade. On the other hand, Algeria established a state monopoly for all foreign exchange transactions. The commodity range of state trading was also extended in Ghana, Guinea-Bissau, and Iran. Early in 1978 Guyana announced that all foreign trade would henceforth be the responsibility of the State.

2. Exports and Export Proceeds

During the period under review, a number of countries introduced new or expanded existing export subsidy and incentive schemes. Of increasing importance was the provision of special financing facilities for exports, usually accompanied by concessional rates of interest. A number of developed countries, and some developing countries, improved their existing financing arrangements for exports, while there was more widespread use of government export credit guarantees and exchange risk guarantees on exports. Actions involving quantitative limitations on exports usually involved the application or removal of restrictions on particular commodities for domestic supply purposes. There was a small but increasing number of such actions on the part of individual countries, however, which reflected the use of export restraint agreements with partner countries.

Argentina raised the level of export rebates for a number of specified commodities and extended, until the end of 1979, the system of income-tax refunds on a specified proportion of exports. Bolivia enacted a new law providing, inter alia, for fiscal incentives for nontraditional exports. Brazil enlarged the application of fiscal incentives, previously reserved for exports, to domestic sales of Brazilian-made machinery and equipment to specified foreign firms in Brazil, provided that the products are paid for in foreign currency. In Colombia, the system of tax credit certificates was adjusted so as to grant certificates at higher rates to nontraditional exports; preferential treatment was accorded to labor-intensive industries and those dominated by small and medium-sized firms. Ghana raised the export bonus for nontraditional exports and announced the application of an export bonus to most other exports. Exporters of specified commodities benefited from increased subsidies or tax rebates in India and Turkey; however, at the end of February 1978 the latter country substantially reduced its export rebates. Mexico reinstituted rebates of indirect taxes on exports of manufactures and New Zealand extended the coverage of the existing tax-incentive scheme for exports. Portugal introduced a scheme for tax incentives for exports for the period 1977–79. On the other hand, Israel eliminated its long-standing system of export rebates when it announced its major reform of the exchange and trade system in October 1977. In conjunction with major exchange reforms, Nepal and Sri Lanka eliminated discriminatory export incentive schemes operated through the exchange system.

Under an accord reached in March 1977, the EEC countries agreed to standardize export credit facilities in its member countries by adopting uniform interest rates and repayment periods for credits granted to foreign importing countries. This agreement followed a “consensus” reached in the previous year between a number of European countries, Canada, Japan, and the United States on the coordination of regulations relating to export financing. Early in 1978 the countries subscribing to the 1976 consensus announced that they had decided to renew that arrangement for an indefinite period, subject to annual review.

Among individual industrial countries, Austria established a special rediscount facility for export bills, and later doubled the amount available under the scheme. In France, new measures of financial assistance to exporters included government loans to exporting firms and loans to governments of developing countries to facilitate the purchase of French capital goods. France also raised the global ceiling on short-term bank export credits to small and medium-sized firms. Switzerland extended, on two occasions, the gentleman’s agreement on the preferential rediscounting of export bills for specified commodities. In the United Kingdom, the Export Credits Guarantee Department (ECGD) indicated in February 1977 that it would no longer make available guaranteed sterling finance for contracts requiring the support of non-U.K. concerns and that it would underwrite large projects only if financing was in foreign currency. The United Kingdom also announced a new scheme to help companies in financing the cost of developing new export markets. New arrangements for sterling financing for exports with credit terms of two years or more were introduced by the ECGD with effect from April 1, 1978; under these arrangements banks could carry, with ECGD guarantee, a higher proportion of export financing. The Export-Import Bank of the United States (Eximbank) lowered interest rates on loans to finance exports, and in December 1977 the United States announced an increase in the funds available for export credits.

Among the developing countries, Argentina revised its system of financial incentives for exports in the form of prefinancing and abolished the system of “postfinancing,” under which credit was granted for export contracts already entered into. These changes involved a significant reduction of Argentina’s subsidies for exports. A new export finance system came into effect in Argentina on January 1, 1978, under which exporters were entitled to loans covering 80 per cent to 90 per cent of their exports. Colombia announced a rediscount facility for the financing of exports of capital goods at preferential interest rates; the scheme was later extended to the financing of projects directly involving exports of both goods or services; the facility was to become effective one year after its establishment. Pakistan reduced interest rates under its refinancing facility for exports, and later simplified its export finance scheme. Rediscounting facilities for exports were also improved in Malaysia and the Philippines. In Uruguay, there was a reduction in the proportion of exports which could be prefinanced and an increase in Central Bank commissions on such financing.

Several countries modified their systems of guarantees and insurance on export credits, or exchange risks insurance. France adapted the scheme proposed by the Compagnie Française d’Assurance pour le Commerce Extérieur (Coface), which provides insurance against abnormal domestic price increases affecting export contracts. In assessing the premium payable on the basis of the inflation guarantee, French companies were required, from March 1977, to pay a surcharge equivalent to one third of the depreciation of the French franc against the SDR. The Federal Republic of Germany approved an increase in the credit ceiling for export credit insurance. Japan introduced an export bond insurance scheme to cover the calling of exporters’ bonds; these bonds are required from exporters of industrial equipment at the signing of the contract. Norway raised the ceiling on government guarantees for ordinary export credits as well as the ceiling under the special arrangement covering exports to and investments in developing countries. Portugal established an exchange risk insurance fund. In the United Kingdom, the ECGD provided exchange rate cover to exporters for up to nine months from the date of fixing a tender price in foreign currency. Among other countries, forward cover arrangements for exports were established in Bangladesh and Pakistan.

A number of countries abolished or eased quantitative restrictions on exports of specified products. Lebanon eliminated export licensing for a large number of commodities in April 1977, and in June terminated licensing requirements for most other export items. India announced an overhaul of administrative procedures for exports and during the period removed the prohibition on certain exports while imposing temporary restrictions on a few others. Export procedures were also simplified in Bangladesh. Prohibitions on specified exports were also terminated in Argentina, Australia, and Pakistan, while quantitative controls on some export items were relaxed in Colombia, Sri Lanka, and Turkey. Colombia, however, added some items to the list of exports subject to approval and to the list of products exportable only by producers and subject to quotas. Colombia also added certain basic foodstuffs to the list of suspended exports to relieve domestic supply scarcities. Argentina prohibited exports of live cattle and applied a quota to exports of soya meal, while Brazil temporarily suspended exports of soya meal. Canada reduced the export quota for petroleum and the Federal Republic of Germany announced that henceforth it would no longer approve the sale of nuclear fuel processing plants and related technology. Measures to prohibit or restrict exports of specified commodities were also introduced in Bangladesh, Ethiopia, and Sudan. In addition to the actions described above, a number of countries took steps to limit exports of certain commodities under the provisions of export restraint agreements negotiated with importing countries.

In the area of export taxation, there was a noticeable trend, particularly among developing countries, to apply new or to increase existing taxes on exports of primary commodities whose prices had risen sharply in world markets. Coffee exports were subjected to tax increases in a number of countries, among them Brazil, Kenya, and Zaïre. Brazil introduced new regulations providing for the application of a tax of 10 per cent on any export product; the tax may be raised to 40 per cent, if needed, to meet foreign exchange and trade policy objectives. Argentina raised the statistical tax on exports from 0.3 per cent to 1 per cent, and Western Samoa applied a levy to the export of cocoa and copra. On the other hand, Canada lowered the levies on exports of petroleum and petroleum products, India reduced the export duty on coffee, while Nepal abolished export duties on a large number of commodities and Uruguay eliminated taxes on exports of beef.

Regulations governing the surrender of exchange proceeds from exports were modified in several countries. Argentina liberalized and in some cases abolished surrender requirements for exports and relaxed the prescription of currency requirements. Surrender requirements were also eased in Chile and Jordan, and were modified in Colombia. Turkey relaxed regulations relating to commodity exports on credit terms. Uruguay reduced the subsidy on the conversion of foreign currency deposits into peso credits to exporters, while in Zaïre exporters were permitted to hold a specified proportion of export earnings in foreign currency accounts. Ethiopia ceased to permit exports on a consignment basis.

3. Current Invisibles

Reflecting the easing of pressures on its external payments position, Italy terminated most of its restrictions on current payments for invisibles. Some of the other developed countries also relaxed existing regulations relating to invisibles, as did several developing countries which in the previous year had introduced new or intensified existing restrictions in the face of increased payments difficulties. However, a few countries introduced new restrictions on invisibles, usually in conjunction with other trade and payments measures, as a means of alleviating balance of payments pressures or to prevent unauthorized capital outflows.

During the first half of 1977 Italy abolished the restrictions arising from the noninterest-bearing deposit requirement on purchases of foreign exchange, and the exchange tax applied to purchases of foreign exchange; these measures had been introduced in 1976. Italy also raised the limit on purchases of foreign exchange for travel abroad. Japan announced several measures to relax exchange controls on invisible transactions. These included the removal of limitations on current payments such as medical and educational expenses and the abolition of ceilings on the amount of foreign currency which could be taken out of Japan by persons traveling abroad. Early in 1978 Japan announced a series of measures further liberalizing exchange controls. The limit on remittances for external transactions not requiring individual approval was raised from US$3,000 to US$12,000, while limits on exchange for travel and other specific purposes were abolished. In the United Kingdom there was an increase in the amount which could be remitted abroad in the form of cash gifts, and in the amount of sterling and foreign currency notes which could be taken out by travelers. The limit on foreign currency issuable without reference to the Bank of England for travel abroad was raised.

Among developing countries, Singapore announced that, with effect from June 1, 1978, exchange controls would be abolished. Argentina removed all limits on purchases of foreign exchange for travel and freely permitted all sales of exchange up to US$1,000, regardless of purpose; the limit was subsequently raised to US$5,000. In November 1977 India raised the exchange allowance for tourism from US$100 to US$500. Israel removed the limit on business travel exchange allocations, and raised substantially the limit for other forms of travel. As part of the reform of its exchange system in November 1977, Sri Lanka introduced exchange allocations for travel abroad. Zambia withdrew the prohibition on the purchase of exchange for travel and established an allocation for tourist travel. On the other hand, a number of countries imposed more restrictive measures on the purchase of travel exchange. Brazil on two occasions increased the deposit requirement on the issuance of passports and exit visas, payment of which is a condition for the purchase of exchange for travel. Ghana applied a levy of 10 per cent to the purchase of foreign exchange for travel and later raised the levy to 30 per cent. Jamaica sharply reduced the exchange allocation for tourist travel, applied limits to exchange for business travel, and made purchases for business travel subject to specific approval. Ethiopia eliminated its exchange allocations for some forms of tourist travel but increased allocations for business travel, while Nigeria reduced the basic tourist exchange allocation. Other countries which tightened regulations on travel exchange included Thailand and Zaïre. In Guyana, there was an increase in the tax on airline tickets. Israel, however, abolished its travel tax. Exchange allocations for study or medical treatment abroad were liberalized in Colombia, El Salvador, Pakistan, Sri Lanka, and Zambia.

Exchange controls or restrictions relating to the remittance abroad of income, including the transfer of profits and dividends, were relaxed in a number of countries. In several other countries they were intensified, and at times were extended to payments of interest on private nonguaranteed foreign borrowing. Argentina eliminated the requirement that payment abroad of profits, dividends, and royalties be made by way of U.S. dollar-denominated bonds issued by the Government, while Somalia raised substantially the proportion of capital invested which could be remitted abroad as profits. The ceiling on remittances abroad of profits and dividends was raised in Sri Lanka. Zambia lifted the prohibition on the remittance of rental income, raised the limit on profit remittances by farmers but withdrew income remittance facilities previously granted to foreign-controlled companies, and imposed tighter controls on salary remittances by foreign nationals. Other countries which liberalized regulations on income and related remittances included Bangladesh, Greece, and Guinea-Bissau. More restrictive regulations on remittance of income and other payments for invisibles were applied in Jamaica where, in principle, no exchange was made available for income remittances from emigrants’ property in Jamaica and for remittances for family maintenance. Payments and transfers in respect of interest on private nonguaranteed debt were made subject to approval on a delayed basis; as a result, arrears of interest payments on such debt emerged in Jamaica during 1977. Arrears on remittances of dividends continued to exist in Madagascar. The permissible level of salary remittances was reduced in Ethiopia. In South Africa, transfers abroad of dividends of foreign companies, which had been permitted in respect of those earned since January 1, 1960, were limited to dividends earned since January 1, 1975.

In India and Sudan, special facilities were provided to nationals working abroad in respect of income remitted to their home country. Early in 1978, in conjunction with an adjustment of the exchange rate of the Turkish lira, the special arrangements with respect to inward remitttances by Turkish nationals working abroad ceased to yield a more depreciated effective rate.

Several countries introduced more liberal regulations affecting transfers of invisibles related to trade transactions, insurance, and maritime contracts. Thus, Argentina, Chile, and Colombia eliminated the prior approval requirement for various categories of service payments, while Pakistan restored permission for transfers to India for settlement of specified invisible transactions. Jamaica, however, subjected payments and transfers in respect of certain insurance-related transactions to approval on a delayed basis.

Restrictions on the import and export of domestic banknotes were eased in several countries. Italy lifted the ban on the export of banknotes in denominations of Lit 20,000 and Lit 50,000, while maintaining the prohibition on the export of Lit 100,000 banknotes, and Austria lifted the restrictions on the exchange of Italian banknotes in denominations exceeding Lit 10,000. Iceland increased the amount of domestic banknotes which travelers could take out or bring into the country, and Israel lifted the restrictions on the import of domestic banknotes while permitting the export of domestic currency by residents up to the maximum provided by the travel allowance, and up to I £ 1,000 in the case of nonresidents. Japan raised the ceiling on yen currency which may be taken out by travelers and also simplified procedures for remittances abroad and for the purchase of exchange for foreign travel. Ethiopia, on the other hand, reduced the amount of domestic banknotes which could be taken out or brought into the country, while in Sweden the Riksbank would no longer purchase banknotes in denominations in excess of SKr 100 from abroad. At the end of February 1978, Switzerland reimposed a quarterly limit of Sw F 20,000 a person on the value of foreign banknotes which could be imported.

4. Multiple Currency Practices

During the period under review four countries officially unified their dual exchange rate systems, while one country established a dual exchange market. Chile formally unified its exchange system in June 1977 by abolishing the brokers’ exchange market; rates in the official and the brokers’ exchange markets had been identical since August 25, 1975. In October, Peru established a single exchange market covering all permitted transactions, and abolished the two official exchange markets, the certificate market and the draft market. Exchange rates in these markets had been effectively unified since September 1975. In December, however, authorized banks were permitted to issue freely negotiable certificates of deposit denominated in foreign currency; these certificates may be used to effect payments for imports, thereby giving rise to a different effective exchange rate. Sri Lanka unified its exchange rate system in November 1977 by abolishing the certificate market arrangement (the Foreign Exchange Entitlement Certificate Scheme) which had been operated at a premium of 65 per cent in terms of the domestic currency cost of foreign exchange. Jamaica introduced a dual exchange market in April 1977. The exchange market was split into a “basic” market, where essential imports and transactions of the Government and most transactions of the bauxite sector are conducted, and a “special” market where all other transactions are conducted at a depreciated rate. In August 1977, payments for imports of crude petroleum were transferred from the “basic” to the “special” market. The rate applying in the “special” market was depreciated further in October 1977 and January 1978. On the latter occasion, the “basic” rate was also depreciated. As part of a stabilization program adopted in May 1978, Jamaica abolished its dual exchange rate system. In a reform of its exchange system in March 1978, Nepal abolished the Exporters’ Exchange Entitlement Scheme and introduced a dual exchange rate system under which most export and import transactions, other than those with India, were to be effected at the depreciated exchange rate.

In November, the Belgian-Luxembourg Economic Union (BLEU) announced that, with effect from December 1, 1977, exchange transactions relating to trade in diamonds, which previously had been conducted through the official exchange market, would be effected through the financial market. In Ecuador, which has maintained a dual exchange market since 1971, the spread between rates in the official and free exchange markets widened in the first few months of 1977, but subsequently the authorities intervened in the free market in order to reduce the spread. In February 1977, Egypt shifted many imports and exports from the official market to the parallel market. As a result, only imports of seven basic commodities and the noncapital imports of the petroleum sector, as well as exports of raw cotton, rice, and petroleum, continued to be transacted at the official rate. At the same time, all current receipts from invisibles except Suez Canal and Sumed pipeline dues were effected at the parallel rate, as were all current payments for invisibles except for a few payments of the Government. Capital transactions of the public sector, other than those related to non-project loans and deposits from abroad and to the repayment of debts of the Government and of the Central Bank incurred before 1977, were also moved to the parallel market. In June 1977 the foreign investment law of Egypt was amended so as to establish clearly the rate in the parallel market as the rate for transactions related to direct investment. There were no significant changes in the dual market systems in Paraguay and Uruguay, while exchange rates in the dual markets of Iran and the Syrian Arab Republic remained effectively unified.

In July 1977 the Central Bank of Argentina no longer provided exchange guarantees in respect of amortization and interest payments on financial loans, thereby terminating the special rate of $a 140 per U.S. dollar for such transactions. Subsequently, Argentina eliminated its remaining multiple currency practice when the tax on foreign exchange transactions was unified at 0.6 per cent. Burma removed the multiple currency practice involved in the operation of the Export Price Equalization Fund. In connection with the reform of its exchange system, Israel eliminated all existing multiple currency practices. Italy, which had introduced two measures involving multiple currency practices in 1976, eliminated them in the first half of 1977. The tax on purchases of foreign exchange for most current transactions, which the Italian authorities introduced in October 1976 at the level of 7 per cent and reduced to 3.5 per cent at the end of 1976, was from January 3, 1977 reduced at weekly intervals in steps of ½ of a percentage point until the elimination of the tax on February 18, 1977. The 90-day noninterest-bearing deposit requirement on purchases of foreign exchange and on the placement of credits of any kind to nonresident lira accounts, which had been in effect with some adaptations since May 1976, was reduced from 50 per cent to 25 per cent on January 15, 1977. It was further reduced to 10 per cent on February 28, 1977, and was abolished on April 15, 1977. The deposit requirement of 25 per cent or 50 per cent on most outward transfers of capital remained in effect.

Among countries which modified their multiple exchange rate systems, Brazil increased substantially the exchange taxes on proceeds from coffee exports but lowered them drastically in December 1977 after world coffee prices had fallen. In February 1977 an exchange tax was applied to exports of soybeans and soybean products but it was suspended in August. In January 1977, Colombia modified the rates of the tax credit certificates for a large number of industrial and agricultural export items. A further modification of these rates became effective in January 1978. The imposition of two deposit requirements for foreign exchange payments and a discount on the sale, under certain circumstances, of exchange certificates which had been issued in exchange for the surrender of exchange proceeds, gave rise to new effective exchange rates in Colombia. In the Dominican Republic, the tolerated free exchange market was increased in scope through the switching of a large number of import payments to that market. New multiple currency practices arose in Ghana, with the introduction of a tax on the purchase of exchange for travel, and in Western Samoa, through the introduction of an exchange profit levy on gross sales of foreign exchange. Early in 1978, Grenada increased the tax on most purchases of foreign exchange from 2.5 per cent to 5 per cent. In Indonesia, the introduction with effect from January 1, 1977 of an advance import deposit requirement for specified imports, a financial guarantee amounting to 100 per cent of the value of these imports, and the requirement of advance payment of import duties gave rise to a new multiple currency practice. The Lao People’s Democratic Republic announced the application of a premium on certain sales of foreign exchange, but this practice was terminated in May 1978.

In the United Kingdom, some regulations concerning the investment currency market were modified with effect from January 1, 1978 in line with the United Kingdom’s undertakings under the terms of its accession to the EEC. The requirement to convert 25 per cent of the net proceeds of sale of a holding of investment currency or foreign currency securities through the official foreign exchange market was abolished. Foreign currency loans taken up to purchase securities issued by the EEC, the European Investment Bank, the European Coal and Steel Community, and the European Atomic Energy Community may now be repaid with official exchange over a five-year period; previously, such loans had been repayable only out of the proceeds realized from the sale of foreign currency securities so acquired or, in the event of a shortfall, with investment currency. Furthermore, the limit of official foreign exchange made available for certain investment projects was raised where the investment was to be in another EEC country. The rules for financing such investments, which allow for the use of investment currency, were otherwise unchanged. In 1977, the effective premium in the investment currency market remained at levels somewhat lower than those of the previous year. In South Africa the discount in the market for freely negotiable securities rand over 1977 averaged about 31 per cent.

5. Bilateral Payments Arrangements

There was further progress during the period under review in the elimination of bilateral payments arrangements maintained by member countries with other Fund members and with nonmember countries, although the number of arrangements terminated was appreciably less than that registered in the previous two years. Five arrangements between member countries were terminated; these were the arrangements maintained by Israel with Brazil and Portugal, those maintained by Yugoslavia with Brazil and Greece, and the agreement between Egypt and Viet Nam. However, an additional arrangement, that between Algeria and Guinea-Bissau, was added to the list of such agreements between members when the latter country became a Fund member in early 1977. Four agreements between members and nonmembers were also eliminated during the period under review. Cyprus terminated its agreements with the German Democratic Republic and the U.S.S.R., while Greece terminated its arrangement with the U.S.S.R., and India its arrangement with Hungary. A new agreement was concluded between Jordan and Poland.

About 47 operative bilateral payments arrangements are still maintained between members. The Fund has found that five of the arrangements currently operative involve bilateral payments features for one party only, while seven agreements are regarded as inoperative. The number of bilateral payments arrangements between members and non-members has fallen to about 144. The number of arrangements between members is now some 6 per cent less than the level recorded at the end of 1970, while arrangements between members and nonmembers were reduced over the same period by almost 30 per cent. Over this period, Fund membership rose by close to 14 per cent.

6. Capital Flows

Measures bearing on capital movements during the period under review represented in general the continuation of policies already in place during the preceding period. Policies on capital flows in the industrial countries were related partly to developments in foreign exchange markets, and were aimed at averting unwanted capital flows and absorbing bank liquidity generated by foreign exchange market interventions of the respective central banks. As the main conduit of funds, the banking system was the primary focus of policy changes, although there were also numerous measures affecting capital flows through nonbanks.

In the Federal Republic of Germany, the Deutsche Bundesbank in September 1977 invited commercial banks in Germany to offer the proceeds from deutsche mark–denominated foreign bonds floated by foreign issuers to the Deutsche Bundesbank for conversion into another currency. Also in September, a cash deposit requirement on borrowings by residents from nonresidents, which was still in force for residents who had not complied with the requirement until September 1974, was completely abolished. Following a period of sustained upward pressure on the deutsche mark, the authorities of the Federal Republic of Germany increased, with effect from January 1, 1978, the minimum reserve requirement on banks’ foreign liabilities from 12.75 per cent to 20 per cent for sight deposits, from 8.95 per cent to 15 per cent for time deposits, and from 5.65 per cent to 10 per cent for savings deposits. Increases in the banks’ foreign liabilities beyond the average level for the quarter ended in mid-December 1977 were made subject to a new reserve requirement of 80 per cent.

Also largely reflecting exchange market developments, Switzerland introduced a series of measures aimed at restraining capital inflows, especially through the banks. The framework for exercising surveillance on capital movements was reinforced, notably by strengthening and extending the gentleman’s agreement between the Swiss National Bank and the Swiss Bankers’ Association. A new agreement introduced in July 1977 specified the general terms and conditions for the acceptance of foreign funds by the banks, including the application of the banking secrecy law. Furthermore, the Swiss authorities extended, to the end of June 1978, the March 1975 agreement on the banks’ daily reporting to the Swiss National Bank of all spot and forward foreign exchange transactions exceeding the equivalent of US$5 million. Switzerland also extended until mid-July 1978, a June 1976 agreement with the banks, under which they were required to instruct their foreign affiliates to refrain from speculative transactions against the Swiss franc; the banks are required under the same agreement to refrain from depositing funds out of Switzerland into Euro-Swiss franc accounts or in the form of direct placements with their branches or subsidiaries abroad. Following continued upward pressure on the Swiss franc, Switzerland introduced a number of new measures early in 1978 aimed at moderating the inflow of foreign funds. In February 1978, the full exemption granted under the 10 per cent quarterly negative interest rate to balances of nonresident Swiss franc deposits outstanding at the end of October 1974 was reduced to 80 per cent of such balances; the reduction did not, however, apply to balances under Sw F 1 million, but balances exceeding Sw F 5 million henceforth became subject to the charge, irrespective of the reference date. These measures, which came into effect in April 1978, were intended to encourage an unwinding of Swiss franc deposits by nonresidents. In March 1978, the Swiss National Bank withdrew the exemption previously granted to foreign monetary authorities in respect of the negative interest charge on nonresident deposits of Swiss francs.

In Japan, several steps were taken to facilitate outward capital movements through the banking system early in 1977; subsequently, in response to pressures on the exchange rate, measures were adopted to reduce capital inflows. In July 1977 Japanese foreign exchange banks were permitted to extend medium-term and long-term loans in foreign currencies more freely, based in principle on medium-term and long-term fundings; the control on short-term bank loans to nonresidents was simultaneously abolished. On the other hand, capital control measures were tightened in Japan in some respects in order to counter speculative capital inflows. An incremental reserve requirement of 50 per cent on nonresident free yen deposits was introduced in November 1977 in an effort to further restrain capital inflows; in mid-March 1978 the reserve requirement was raised to 100 per cent. In June 1977, the Bank of Japan introduced a reserve requirement of 0.25 per cent on foreign exchange banks’ foreign currency liabilities, including those in the form of residents’ foreign currency deposits; in the same month, restrictions were abolished on foreign currency deposits by residents and nonresidents. In November 1977, the Japanese authorities introduced a system of periodic inspection of the books of overseas branches of Japanese banks as well as local branches of large foreign banks.

In the United States, new and detailed reporting requirements on the foreign operations of U.S. banks were announced in October 1977, to become effective at the end of 1978. In December 1977, the reserve requirement on loans by foreign branches of U.S. banks to U.S. residents (under Regulation M) was reduced from 4 per cent to 1 per cent. In addition, the U.S. Comptroller of the Currency in January 1978 announced his intention to clarify the regulation limiting a U.S. bank’s loans to a single borrower to no more than 10 per cent of the bank’s capital; for the purposes of this regulation, individual foreign governments and their agencies would be counted as one entity, unless evidence could be furnished by the bank showing that (1) the borrower has adequate resources or income of its own to service the debt, and (2) the loan proceeds would be used by the borrower in its own business and for the purposes stated in the loan agreement.

Among other industrial countries which introduced new measures on capital flows through the banks, Italy in mid-April 1977 abolished the deposit requirement introduced in May 1976 on purchases of foreign exchange. Beginning in October 1977, some banks, insurance companies, and merchants in the United Kingdom were permitted to retain larger balances in foreign currencies. In other European countries, Ireland announced that 50 per cent of all net capital inflows to the banks after May 18, 1977, except those for financing major industrial products, should be deposited with the Central Bank. In March 1977 Turkey authorized banks to open convertible lira accounts in favor of individuals or legal entities domiciled in Turkey and increased the permissible interest rate markup on convertible lira deposits.

With respect to portfolio investments, new policy measures introduced in the industrial countries during the review period included the authorization granted in Denmark for residents to purchase securities issued by European and other international institutions of which Denmark is a member. In the Federal Republic of Germany, it was announced in December 1977 that the Bundesbank would no longer approve the acquisition by nonresidents of domestic securities with an outstanding maturity of two to four years. Japan took several steps during the review period to liberalize controls on outward capital movements. They included (1) the abolition in mid-1977 of the restrictions on purchases by residents of foreign securities of less than one year’s maturity; (2) the additional application of income tax exemption to interest on yen-denominated, government-guaranteed bonds issued by foreign borrowers or certain international institutions designated by the Minister of Finance, to the extent that, together with other small savings, the principal per person does not exceed a total of ¥ 3 million; (3) favorable treatment for placements of loan instruments by foreign borrowers in Japan; and (4) the approval, for the first time, of the issuance of yen-denominated bonds in the Eurobond market. Commencing November 1977 Japan adopted several measures aimed at limiting inward portfolio capital. In that month, public sales of short-term treasury bills were suspended. Subsequently, as part of measures introduced in mid-March 1978 to counter speculative inflows, Japan tightened restrictions on nonresident purchases of yen-denominated securities with maturities not exceeding 61 months; yen-denominated bonds issued by overseas borrowers were, however, exempted from the new regulations. The Netherlands, in September 1977, while retaining existing restrictions in substance, considerably simplified their form. The new regulations aim at greater clarity, and a number of transactions are no longer subject to permission but to reporting obligations only. In Switzerland, a number of steps were taken during the period under review to ease nonresidents’ access to the domestic capital market, including a relaxation of the conditions governing public bond issues and the granting of general authorization for public bond issues in individual amounts not exceeding Sw F 10 million; new bond issues by nonresidents were, however, made subject to a minimum resident participation ratio of 65 per cent. In addition, the Swiss National Bank in November 1977 notified the banks not to allow advance repayment of medium-term private placements by nonresidents. In the United Kingdom, it was announced in December 1977 that foreign currency loans in connection with purchases of certain foreign securities could be repaid with official exchange over a five-year period.

In the area of controls on foreign direct investment, France in July 1977 announced an increase, from F 2 million to F 3 million, in the official ceiling on permissible foreign investments which could be made without prior authorization when such investments were in the form of loans or guarantees to French subsidiaries of foreign enterprises. Canada relaxed regulations on inward foreign investments in March 1977 by exempting from prior review requirements, the establishment of assembly or manufacturing operations by foreign importers and distributors of proprietary products in Canada; review procedures were simplified for takeovers involving firms with assets of less than Can$2 million and with fewer than 100 employees. In Switzerland, the authorities extended until the end of March 1978, the 1976 gentleman’s agreement between major foreign firms in Switzerland and the Swiss National Bank, under which the firms were required to file periodic reports to the Bank indicating their “repatriation potential” with respect to corporate earnings and capital. In the United Kingdom, the authorities obtained in December 1977 from the Commission of the EEC, an authorization under Article 108 of the EEC Treaty to maintain certain restrictions on capital movements, including direct investments in other member countries. However, with effect from January 1978, and following the marked improvement in its external payments position, the United Kingdom took a number of steps to liberalize capital outflows, notably by increasing the limit of official exchange made available for certain categories of direct foreign investments in other EEC countries, and by abolishing the 25 per cent surrender requirement on transactions in investment securities. Among other European countries, Spain in January 1977 substantially eased its regulations on inward foreign investments.

With respect to other forms of capital flows, changes in the industrial countries during the period reviewed included an extension by the United Kingdom of their existing powers to control the raising of sterling finance by resident companies controlled by nonresidents. However, most categories of such companies were permitted to raise sterling finance without limit. In Norway, the ceiling on government guarantees for investment credits to developing countries was doubled in February 1977.

Among other countries, Australia took steps in January 1977 to prohibit nonresidents’ market purchases of existing fixed-interest securities, as well as market purchases of, or subscriptions to, government securities. In addition, Australia introduced a requirement in respect of all overseas borrowings of two years or more, for purposes other than capital investment, that the borrower must make a noninterest-bearing deposit with the Reserve Bank of Australia amounting to 25 per cent of loan value, for a retention period of up to three years; this requirement was rescinded in July 1977. South Africa took a number of steps to tighten controls on nonbank outward capital movements.

Argentina granted authorization in June 1977 for purchases of foreign exchange out of nonresident accounts, up to a maximum of US$1,000, without a written declaration of the purpose of the purchase. In January 1977, Bangladesh extended eligibility for the maintenance of convertible accounts in domestic currency with authorized local banks to foreign oil companies engaged in domestic oil exploration, foreign contractors and consultants working on specific projects, and resident foreign nationals. In January 1977, Brazil increased the limits on the banks’ foreign exchange positions. In March 1977, Honduras suspended all new foreign borrowings by the banking system with a maturity of less than two years; bank guarantees for medium-term and long-term foreign loans were also restricted to those for importation of agricultural and industrial machinery and for public work programs. In October 1977, Israel liberalized the existing system of domestic accounts in foreign currency. Reflecting the improvement in its balance of payments, Korea announced in November 1977 that certain types of foreign exchange loans to local companies by foreign bank branches in Korea would no longer be permitted; steps had also been taken in August of the same year to reduce the maximum permissible interest rates on foreign currency loans, foreign currency time deposits, and swap margins of foreign bank branches in Korea. Lebanon issued a new bank licensing law after the expiration of a ten-year moratorium on new banks, and in April 1977 legislated to establish a free zone banking facility.

Among other developing countries which introduced new measures affecting capital flows through banks, Mexico in August 1977 raised the reserve requirement on U.S. dollar-denominated savings deposits from 30 per cent to 75 per cent. In Oman, the Central Bank announced in April 1977 that all locally incorporated banks must have at least 50 per cent Omani shareholding. In furtherance of the objective of developing regional financial centers, the Philippines in April 1977 granted authorization to 11 foreign banks to operate offshore banking units; authorization was simultaneously granted, under an expanded foreign currency deposit scheme, for specified domestic and foreign bank branches to borrow funds in the international market for onlending to domestic borrowers. As a domestic liquidity measure, Saudi Arabia, at the beginning of July 1977, raised from 1 per cent to 5 per cent the reserve requirement on deposits in foreign currency. In a move to promote increased availability of foreign exchange funds through the domestic banking system, Sudan in March 1977 granted permission for authorized dealers to open deposit accounts in freely usable currencies, for specified categories of residents, nonresidents, and transactions. The Yemen Arab Republic in January 1977 required banks to obtain Central Bank approval before contracting or guaranteeing foreign loans to residents and nonresidents.

In the area of policies on direct foreign investments, Bahrain in October 1977 introduced new regulations to exempt from certain requirements of the internal corporate law domestically established firms whose businesses are substantially outside the country. Chile removed the limitations on repatriation of profits on inward foreign investment, and allowed authorized remittances of foreign investors to be maintained in the form of domestic deposits; authorization was also granted for repatriation of capital that had been invested for at least three years. The Republic of China revised extensively its foreign investment incentives; the measures included (1) an increase, from 15 per cent to 20 per cent of investment values, in the permissible margin of capital repatriation within two years of completion of a project; (2) elimination of the 80 per cent ceiling on a foreign investor’s share in joint technical ventures; and (3) an increase by one to three years in the five-year tax holiday period for investments in technology-oriented industries. In January 1977, Colombia raised from 14 per cent to 20 per cent of investment, the maximum rate of profits which could be transferred by foreign investors from outside the Andean Pact region; the automatically reinvestible proportion of foreign firms’ profits was also increased from 5 per cent to 7 per cent, and foreign-owned companies were made eligible for domestic loans not exceeding three years in maturity. In India, changes in the investment regulations were aimed at facilitating investments by nonresident Indians and persons of Indian origin. Lebanon established an investment insurance facility in March 1977, which included scope for insuring foreign as well as domestic investments against noncivilian risks.

Among other developing countries, Nigeria in January 1977 shifted several specified industries into the category requiring higher minimal equity participation by Nigerians. In a similar move, Saudi Arabia announced in January 1977 that at least 60 per cent of ownership of foreign banks must be held by Saudi Arabian nationals. In April 1977, Viet Nam introduced a new law on foreign investment incentives.

Among the developing countries which introduced new measures on direct foreign borrowing during the review period, Argentina in May 1977 made subject to prior approval by the Central Bank all loans from a foreign company to a domestic subsidiary. Also, the minimum permissible maturity for foreign currency loans was raised in August 1977 from six months to one year, and in November 1977 from one to two years. Brazil raised the ceilings on foreign credits with treasury guarantee. In November, proceeds of all foreign loans entering Brazil through the end of 1977 were required to be deposited with the Central Bank for a period of about six weeks. Colombia in April 1977 raised by 20 per cent the existing US$1 billion ceiling on foreign loans incurred or guaranteed by the public sector for the purpose of development financing. In October 1977 the Republic of China prohibited short-term foreign borrowing for financing working capital requirements in domestic currency. The official ceiling on loans and advances by foreign-owned banks was liberalized in Pakistan in January 1977, while the Philippines introduced regulations to permit foreign-owned companies to raise loans in domestic currency, provided certain specified debt-equity ratios were met. In Uruguay, the interest paid on foreign currency deposit requirements in respect of foreign loans was reduced in August 1977 from 2 percentage points above Libor to the Libor rate; at the beginning of December 1977, it was announced that no interest payments would be made on additions to foreign currency deposit requirements, and that the Libor rate would apply to the existing stock of such deposits as of the end of November 1977.

7. Gold Movements

Prior to the expiration at the end of January 1978 of the transitional arrangement on gold among the Group of Ten countries and with Switzerland and Portugal, these countries reviewed the arrangement and informed the Fund of their decision not to extend it, in view of the expected entry into force of the Second Amendment to the Fund’s Articles of Agreement.

A number of countries changed existing regulations governing external and domestic trade in gold. Argentina lifted the ban on sales of gold coins to the public, but all gold sales remained subject to formal reporting to the Central Bank. Iran introduced a tax of 5 per cent on gold imports. In a move substantially liberalizing transactions in gold, Japan in January 1978 removed restrictions on foreign trade in gold not exceeding the equivalent of ¥ 3 million, and subjected transactions beyond that amount to only formal reporting to a foreign exchange bank in the case of gold imports, and to the customs where gold exports were involved. In January 1978, Pakistan banned both domestic and external trade in gold bullion by the banks. In the United Kingdom, it was announced that the regulations on gold coins and medals, which had been applied to all such items manufactured after 1837, would henceforth cease to apply for the most part to those manufactured between 1838 and 1937. The United States introduced a new law making gold clause contracts, as well as multicurrency contracts, enforceable in U.S. courts. In Yugoslavia, a number of regulations were introduced on external trade in commemorative gold coins.

Following the introduction in December 1977 of a scheme of minimum applicable prices for certain steel products, the EEC in January 1978 applied provisional antidumping duties on specified steel items imported from several countries at prices below those specified. On the other hand, in April 1977, the EEC terminated the safeguard action under which the EEC market had for several years been virtually closed to some beef exporting countries.

Belgium, Luxembourg, and Netherlands.

At the end of 1977, the MFA was extended for another period of four years. Bilateral agreements to be concluded under the extended MFA provide for the possibility of “reasonable departures” from certain elements of the agreements.

Austria, Iceland, Norway, Portugal, Sweden, and Switzerland. Finland is an associate member.

Import control developments in the United States were in large part related to official decisions concerning the incidence of dumping of specific import items. Following a determination that major Japanese producers were dumping certain steel products in the U.S. market, the importers concerned were required to post bonds equivalent to the estimated dumping duties of 32 per cent in respect of all further imports of these items from Japan. In a number of cases detailed industry studies by the U.S. authorities led to the determination that no antidumping or similar import control measures needed to be taken.

Canada investigated a number of allegations of dumping of specific products, and subsequently took antidumping actions on imports of certain acids, specified categories of footwear and steel products, and certain chemical products.

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