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Author(s):
International Monetary Fund. External Relations Dept.
Published Date:
March 1973
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Excerpts from a speech by Jelle Zijlstra, President of the Netherlands Bank and of the Bank for International Settlements, at the 50th Anniversary Celebration of the Austrian National Bank, Vienna, November 14, 1972:

“… I want to emphasize two general propositions which should animate the Deputies’ conception of the reformed system. Firstly, as central bankers we are professionally concerned with monetary stability both domestically and internationally, and I believe that the design of the reformed system should be such as to help promote this basic objective. And I also believe that international stability should not be sacrificed except to make an essential contribution to domestic stability. I stress this point because certain ideas about reform seem to be aimed at making it easy for governments to yield to the forces of instability. I believe that such a slant in the reform proposals would have grave consequences socially and politically, as well as economically.

“Secondly, as we have gone through a period of severe monetary disequilibrium internationally, some notions of reform seem to be concerned too specifically with this particular situation. We all hope, of course, that the Smithsonian agreement will resolve the problem in a reasonable time. But if it turns out that further action becomes necessary, it should be clear that such action will be in the context of current policies of various countries and not in the framework of the reform of the system. Therefore, the changes in the system to be proposed as reforms should be confined to the permanent rules under which countries are to make their current policy decisions. . . .

“All of us are concerned with the difficult process of policymaking and the even more difficult task of policy execution. And I do not think that we are under the illusion that these difficulties will be wiped out to any great extent by a few, or even many, changes in the rules of the international monetary system. We shall have the same need for correct analysis, the same need for cooperation and the same need for high purpose in our objectives. . . .”

Excerpts from the opening statement by Ambassador Giorgio Smoquina of Italy, Chairman of the GATT Contracting Parties, at the 28th session, Geneva, November 1, 1972:

“. . . our last session took place around the time of a serious monetary crisis which did not leave any of our countries unaffected, whether developed or developing. Since then, our governments have gone a long way toward meeting the risk of monetary disorder and toward initiating work on the preparation of a new framework for co-operation in this field. At the meeting of the Board of Governors of the International Monetary Fund of some six weeks ago, important decisions were taken, new procedural arrangements made and constructive work immediately undertaken to deal with monetary reform and related issues. The Contracting Parties will no doubt wish to follow as closely as possible further developments in this field, because of the impact that monetary measures nearly always have on international trade. I am sure contracting parties will welcome the fact that Mr. Long, our Director-General, has been invited to participate in meetings of the Committee of Twenty which will be dealing with monetary reform. . . .”

Excerpts from a speech by Takeshi Watanabe, outgoing President of the Asian Development Bank, to the Foreign Correspondents’ Club of Japan, Tokyo, Japan, November 6, 1972:

“. . . We—and other international development agencies—must have a source of funds that we can lend at lower rates. There has been much talk recently about new methods of raising such funds.

“One recently developed idea urges linking the International Monetary Fund’s special drawing rights with aid expansion. In their report on possible reforms of the international monetary system, the IMF directors themselves noted that there could be a ‘broadening’ of SDR use ‘to accommodate giants, loans, or pledges of SDRs.’

“I think those moves to link SDRs and development aid are largely born of desperation. The old aid system seems to be breaking down, or at least to be no longer adequate to meet the needs of developing countries at a cost acceptable to the developed ones. People are looking for easy answers that will produce a new system.

“The plain fact is that the purpose of SDRs is to increase the liquidity of the international currency system. They are not, basically, a tool for development, and to tie them more than marginally to aid expansion could well contradict their main purpose.

“I believe the problem of increasing development aid must be met head on. When a single country finds a need to close the gap between its rich and poor, it turns to its tax system.

“In the international community of sovereign states there is now no authority for imposing such a tax for the benefit of the world’s poor. But such a concept, a true feeling that national boundaries have little meaning before international needs, must come if aid is to be put on a truly rational basis. . . .”

Excerpts from an address by Antonio Ortiz Mena, President of the Inter-American Development Bank, before the International Trade Club of Chicago, November 14, 1972:

“. . . In the negotiations now beginning to reshape trade and monetary arrangements the world faces a crucial choice. The future world order can be based on a narrow concept of interdependence among the most developed and most powerful industrialized economies; such a narrow concept would largely ignore the specific needs of the lesser developed two thirds of the world for capital and trade opportunities. Alternatively, a broader, more responsible definition of world interdependence could be adopted as a principle to guide the choices of policymakers in the ensuing months. Clearly, in my judgment, the broadening of the operative definition of world economic interdependence to include the developing countries, would be in accord with’ the long run practical interest of all, and especially the United States and Latin America.

“In this respect, it is an encouraging sign, that the forum for these negotiations has been broadened by the formation of the Committee of Twenty which includes representation from the developing countries. I believe strongly that a due recognition of world economic interdependence should, in turn, be translated into practical measures which would increase the flow of capital to the developing countries. As you know, the less developed countries have proposed the so-called ‘SDR link’ which would call for less developed countries to receive distributions of new Special Drawing Rights in a proportion greater than their percentage participation in the IMF. There may be alternative measures which, upon study and reflection, would be more desirable. Whatever measure is adopted, I foresee a role for the Inter-American Development Bank as a practical instrument to apply flows of newly created liquidity to sound development purposes in the region. . . .”

THE STRUCTURE OF PROTECTION IN DEVELOPING COUNTRIES

This volume reports on the findings of a research project on the structure of protection in developing countries, sponsored by the World Bank and the Inter-American Development Bank. The choice of this topic reflects a preoccupation on the part of the two institutions with the economic policies followed by developing countries, among which the policies of protection have particular importance.

Research on the volume was directed by Bela Balassa, Professor of Political Economy at The Johns Hopkins University, in his capacity as consultant to the Economics Department of the World Bank. He was aided by several collaborators who carried out the country studies on the basis of a common methodology. The countries studied include Brazil, Chile, Mexico, West Malaysia, Pakistan, the Philippines, and for comparison, a developed country, Norway.

The volume presents a comparative evaluation of the results of the country studies and explores the effects of protection on resource allocation, exports, and economic growth. The experience of the seven countries studied is also utilized to derive some general conclusions on protection in developing countries and to provide guidelines for an “ideal” policy of protection.

It is hoped that, apart from their interest to the economics profession, the methods and the results presented in this volume will be useful in the practical work of international and national organizations. In various respects, the findings of the research project have already been utilized at the World Bank; the dissemination of the results should contribute to their increased use by the two sponsoring institutions as well as by the developing countries themselves.

A Spanish edition will be published soon by the Inter-American Development Bank in cooperation with CEMLA, Mexico.

By Bela Balassa and Associates

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